The government has today announced its latest slew of changes to the budget and with it come a few surprises for the motorist.
In a move to encourage the uptake of zero and low emission cars, Mr Osborne has announced a reform of the Vehicle Excise Duty for post 1 April 2017. Essentially, unless you own an electric zero emission vehicles, there will be some tax to pay, in contrast to the current system whereby any car emitting less than 100 g/km CO2 pays nothing. The move is said to be due to the increasingly lower emissions emitted by cars and that the current system is unfair.
In a backwards move from years past, the taxes will contribute once again to road improvement and maintenance. The result is that a flat rate of £140 per year for all cars will take over from the substantially higher costs a motorist must currently pay for a gas guzzler.
Perhaps most interestingly is the addition of cars with a list price of over £40,000 when new, will pay a supplement of £310 per year on top of the standard rate, for five years. This will presumably apply to electric vehicles too, such as the Tesla Model S and other premium electric vehicles.
The impact of these changes is set to see the government rake in far more cash than at present, as the following table shows (click to view source).
| Exchequer impact (£m) |
2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 |
|---|---|---|---|---|---|---|
| – | +250 | +195 | +670 | +940 | +1425 | |
| These figures are set out in Table 2.1 (point 20) of the Summer Budget 2015 and have been certified by the Office for Budget Responsibility. |
||||||
Reform of vehicle excise duty (VED) rates and bands for post-2017 cars – The government will introduce a new VED banding system for cars registered on or after 1 April 2017. First year rates (FYRs) will vary according to the carbon dioxide emissions of the vehicle. There will be a flat standard rate (SR) of £140 for all cars except those emitting 0 grams of carbon dioxide per kilometre (g/km), for which the standard rate will be £0.00. Cars with a list price above £40,000 will attract a supplement of £310 per year for the first 5 years in which the standard rate is paid. The new VED system will be reviewed as necessary to ensure that it continues to incentivise the cleanest cars.
Company car tax rates for 2019-20 will have their appropriate percentage of list price subject to tax increase by 3% for cars emitting more than 75 g/km CO2, to a maximum of 37%, in 2019-20. There will be a 3% differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km CO2 bands.
The two tables below allow you to compare the current tax bands for 2014/15 and the proposed tax rates for post 1 April 2017 car registrations.
VED bands and rates for cars first registered on or after 1 March 2001
| Tax Band | CO2 g/km | First Year Rate 2014/15 (£) | Standard Rate 2014/15 (£) |
|---|---|---|---|
| A | Up to 100 | 0.00 | 0.00 |
| B | 101-110 | 0.00 | 20.00 |
| C | 111-120 | 0.00 | 30.00 |
| D | 121-130 | 0.00 | 110.00 |
| E | 131-140 | 130.00 | 130.00 |
| F | 141-150 | 145.00 | 145.00 |
| G | 151-165 | 180.00 | 180.00 |
| H | 166-175 | 290.00 | 205.00 |
| I | 176-185 | 345.00 | 225.00 |
| J | 186-200 | 485.00 | 265.00 |
| K* | 201-225 | 635.00 | 285.00 |
| L | 226-255 | 860.00 | 485.00 |
| M | Over 256 | 1090.00 | 500.00 |
VED bands and rates for cars first registered on or after 1 April 2017
| CO2 g/km After April 2017 | First Year Rate on or after 1 April 2017 (£) | Standard Rate on or after 1 April 2017 (£) ** |
|---|---|---|
| 0 | 0.00 | 0.00 |
| 1-50 | 10.00 | 140.00 |
| 51-75 | 25.00 | 140.00 |
| 76-90 | 100.00 | 140.00 |
| 91-100 | 120.00 | 140.00 |
| 101-110 | 140.00 | 140.00 |
| 110-130 | 160.00 | 140.00 |
| 131-150 | 200.00 | 140.00 |
| 151-170 | 500.00 | 140.00 |
| 171-190 | 800.00 | 140.00 |
| 191-225 | 1200.00 | 140.00 |
| 226-255 | 1700.00 | 140.00 |
| Over 255 | 2000.00 | 140.00 |
** Cars with a list price of over £40,000 when new pay a supplement of £310 per year on top of the standard rate, for five years.
