70% of new car buyers face road tax hike in April

New road tax rules will come into force on 1 April 2017 that will result in up to 70% of new car buyers paying more road tax than they would under the current system.

New cars awaiting delivery

At the top of the government’s hit list are drivers of cars with low CO2 emissions. According to research carried out by HonestJohn.co.uk, drivers of popular models such as the  Ford Fiesta 1.0 EcoBoost 100PS will now have to pay £540 in tax over four years.

Bizarrely, the changes appear to benefit drivers of some cars with very high emissions. For example, HonestJohn.co.uk has found that buyers of of Ford’s 5-liter V8 Mustang will pay £245 less over four years than they do under the current system.

Overall, HonestJohn.co.uk estimates that seven out of every ten new car buyers will pay more road after 1 April 2017 than they would if they bought the same car today.

What’s changing?

The problem for the government is that too many cars now qualify for the zero VED tax rate. A whopping 74% of new cars now have CO2 emissions of less than 130g/km. Many of these have emissions of less than 99g/km, and thus qualify for the free road tax for the life of the car.

What started out as an incentive to encourage people to buy lower emission models, has turned into a big cost for the excheqeur. The solution — as you’d expect — is that road tax rates are changing.

Under the new system, buyers of cars registered after 1 April 2017 will pay a first-year VED rate based on the CO2 emissions of their vehicle. This is broadly similar to the current setup, although some rates are changing.

However, from the second year onwards, owners of all cars other than zero emission cars will pay a standard rate of £140 per year. Cars with a purchase price of more than £40,000 will also pay a £310 supplement for the first five years.

Here’s a summary of what to expect:

VED car tax bands for cars first registered from 1 April 2017
CO2 emissions (g/km) First year rate Standard rate*
0 £0 £0
1-50 £10 £140
51-75 £25
76-90 £100
91-100 £120
101-110 £140
111-130 £160
131-150 £200
151-170 £500
171-190 £800
191-225 £1,200
226-255 £1,700
Over 255 £2,000
Cars with a list price of over £40,000 when new will pay a £310 annual supplement on top of standard rate for five years.

Won’t this cost me more?

If you think the new system is likely to cost you more, you’re probably right. All of the UK’s most popular cars will be hit by the changes. For example:

1) Ford Fiesta 1.0 EcoBoost 100PS Zetec

Current VED cost over four years: £0
New VED cost over four years: £540

2) Vauxhall Corsa 1.3 CDTi 95PS ecoFlex Design

Current VED cost over four years: £0
New VED cost over four years: £540

5) Nissan Qashqai 1.5 dCi 110PS Visia

Current VED cost over four years: £0
New VED cost over four years: £540

HonestJohn.co.uk’s research indicates that this new system will raise an additional £1.4 billion for the government over the next four years. It’s easy to see why this has been done, but in reality, it’s just another stealth tax on road users.

What can I do to avoid this?

If you want a new car but are keen to avoid the new VED regime, then you need to buy a new car before 1 April 2017.

That may prove harder than you think. With less than four months to go, many popular new cars have lead times of three months or more. Some Ford Focus buyers are being quoted 3.5 months, for example, while lead times for the Volvo XC90 can be 4-5 months, according to HonestJohn.co.uk.

Commenting on the outlook for new car buyers, HonestJohn.co.uk’s Managing Editor, Daniel Powell, said:

“The new VED rules are a mixed message from the government, as they’re reducing the incentive for customers to choose low emission cars. However, savvy buyers can save themselves a significant amount of money, even if waiting lists are already too long to meet the deadline by simply looking at pre-registered cars.”

Pre-registered or even ex-demo cars are generally as good as new, with low miles, a manufacturer’s warranty and ready availability on dealers’ forecourts. If you’re able to get the car you want in this way, then it may be worth sacrificing the pleasure of owning a genuinely new car.

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