Call it apathy, call it head in the sand, call it downright uninteresting. Any way you call it, road taxes are tedious. They are typically paid once a year (although monthly and six-month permits are certainly an option) leading people to simply pay and forget about it. I understand completely; in a similar vein my trick to dealing with a parking ticket once issued (if I am indeed in the wrong) is to pay it immediately thus avoiding the heinous nature of my crime to fester any longer than necessary. Road taxes are no different – pay it and move along. However, people are slowly waking up to the implications of the changes to road taxes (aka VED, Vehicle Excise Duty) introduced on April 1st, 2017 affecting all vehicles registered after this date. This last bit is important because all cars registered before this date continue to pay road tax rates on the old VED system which was based purely on a cars C02 emissions. So if you’re in the market for a new car, or have recently purchased a car, read on…
As we all know C02 emissions are a main contributor to air pollution in our cities. Get rid of these and we’ll all be breathing much cleaner air. As a course of action, the UK government raised road tax rates on vehicles registered back to 2001 that emitted higher levels of C02 to encourage people to consider less polluting cars. Car manufacturers did their bit by rolling out vehicles that would emit less than 100g/km of C02. Why less than 100g/km? Because this was the cut-off point set by the UK in which no road tax needed to be paid. This was certainly a step in the right direction as buyers who had previously never paid attention to C02 emissions started to factor this in to their decision-making process when purchasing a new car. Yet what transpired is that as buyers started buying more vehicles emitting less than 100g/km of C02, Government road tax receipts went down. This made them have a little rethink…
With the changes introduced on April 1st, 2017 – and subsequently changed again on April 1st, 2018 – cars now have a fixed-price road tax of £140/yr irrespective of your C02 emissions after its first annual road tax has been paid (aka FYR; First Year Rate). At the outset, this might sound like a win but there are a couple of notable kickers. Firstly, the Government wised up to the fact that there was a plethora of vehicles on offer that emitted less than 100g/km of C02. In response, they tightened the C02 emission range-bands with new prices for each. Have a look below, taken from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/709655/ultra-low-emission-vehicles-tax-benefits.pdf :
Using the above table, let’s say you’ve decided on a new 2018 Volvo XC90… You’ve gone the extra step of ordering a petrol version to do your bit to reduce the newest villain in air quality, N0x (ie the soot from a diesel!). Your new XC90 in petrol guise emits 184g/km of C02. This makes you liable to pay an FYR tax rate of… £830. Ouch. While you may take comfort knowing that after the FYR you will only be paying the £140/yr Standard Rate (aka SR) for the next five years, the second kicker might knock you out: because your new Volvo has a list price of over £40k this generates an additional £310 to the SR from years two to six. That’s right – any new car with a list price of over £40k will pay £450 in road tax from years two to six. Your new Volvo? You’re looking at £3080 in road tax in the first six years of ownership! How about a new Supercharged Range Rover? Look away now if you want to keep your last meal down… £2070 FYR, and then £2250 SR for years two to six. That’s £4320 in road tax in the first six years! Ouch again!
So how can you pay £0 road tax for a lifetime, you ask? By choosing a car that has a list price of under £40k and emits precisely zero g/km of C02. This narrows your search considerably to pure electric cars (ie not hybrids or any vehicle with a range extender), and only those pure electric cars that cost less than £40k (ie not a Tesla!).
What does all this mean? In short, if you’re buying a used car that was first registered after April 1st, 2017 be aware – you may have negotiated a great deal but if the original list price of the car was over £40k you’ll still be liable to pay £450/yr in road tax until year six. Similarly, if you’re planning to buy a new car with a list price of over £40k, your first-year rate will be a function of the car’s CO2 emissions but get ready for the £2250 “Luxury Tax” from years two to six (note that there is a £10/yr discount for any hybrid/electric vehicle). If this makes you balk, consider pure electric cars that are less than £40k or consider purchasing a used car, registered before April 1st, 2017 to keep you on the older rates.
But most importantly, remember that Car Sleuth is here to help you make the right decision when you buy your next vehicle!
