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Adam Jolley

Tax changes may deter drivers from buying new cars

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Drivers planning to buy a new car after 1 April may have to pay a much higher rate of vehicle excise duty (VED).

Brand new cars

Two fifths of drivers say impending changes to car tax would discourage them from buying a car with a 2017 plate.

That’s according to new research by Confused.com, which shows the average driver currently pays around £102 for their car tax every year. 

How car tax is calculated

The new rules, which come into force from 1 April, will increase the amount of car tax payable on some 2017-plate vehicles.

Currently car tax - officially named vehicle excise duty (VED) - is calculated on a vehicle’s CO2 emissions. 

Cars below 120g/km pay as little as £0 to £30 annually.

While comparatively more polluting vehicles - those with emissions over 255g/km - pay £515 per year. 

New car tax rules explained

However, under the new rules, revised emissions-based tax brackets have been created. 

This will mean that anyone buying a new car from 1 April may have to pay a much higher rate of VED in their first year – up to almost £1,500 more in some cases.

Meanwhile, a standardised rate of £140 from the second year of ownership will also be introduced.

How tax for petrol and diesel cars compare before and after 1 April 2017

  Pre-1 April 2017 Post-1 April 2017 
Example CO2 emissions Current annual tax rate (based on the vehicle's emissions First year rate (based on the vehicle's emissions) Standard rate after the first year (based on the vehicle's fuel-type)
120g/km  £30  £160 £140
150g/km  £145  £200 £140
170g/km  £210  £500 £140
Over 255g/km £515 £2,000 £140

 

Surge of used car sales expected

With many drivers reluctant to buy new models once the changes come into force, we could see a surge of used cars on our roads, the research suggests.

Almost six in 10 (57%) drivers say they would be more inclined to buy a second-hand motor to avoid the charges.

And, with the only way out of paying car tax being to buy a car with zero emissions, almost a quarter (23%) of drivers would consider buying an electric vehicle.

An unnecessary extra cost for drivers?

Many drivers say they’re sceptical of the new rules. 

Over half (55%) think that the tax changes are in place just to make the government money.

Over a quarter (29%) believe it’s a move to encourage people to buy electric cars. 

And more than half (57%) think the rules are just imposing yet another unnecessary cost for drivers.

Many drivers in the dark about changes

However, according to the research, as many as six out of 10 drivers are completely unaware of the new car tax laws. 

Only one in 10 drivers understand the new rules, which could set them back hundreds of pounds when buying a new car. 

And nearly eight in 10 drivers don’t think the changes have been well-publicised.

‘Worth buying before 1 April’

Amanda Stretton, motoring editor at Confused.com, says: “The new car tax laws are very complex, so it’s no wonder that only one in 10 drivers understand them. 

“The revised emission brackets and standardised rates will mean that many car buyers will feel the pinch. 

“If you are looking to buy a new car, it’s definitely worth considering a purchase before April 1, as your decision will affect the amount of tax you pay for years to come. 

“If you’re still planning to buy after 1 April, we’d recommend researching the car tax rates you can expect to pay for your new vehicle using our car tax bands guide.” 

Car tax law lowdown: New laws for cars registered from 1 April

- The new laws only apply to new 2017-plate cars registered from 1 April.
- The ‘first licence rate’ for vehicle tax remains the same in the first year, and continues to be based on the vehicle’s CO2 emissions.
- After the first year the vehicle will pay one of three standardised rates based on the vehicle’s fuel type:
- £140 per year for petrol and diesel vehicles
- £130 per year for ‘alternative fuel’ vehicles, such as hybrids
- £0 per year for zero-emissions vehicles, such as fully-electric cars
- Vehicles where the manufacturer’s list price is over £40,000 will have to pay an additional £310 on top of the standard rate for five years. After this it’ll be taxed at the standard rate.

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