The Need to Know: Vehicle Excise Duty and the Changes to Car Tax

On April 1st 2019, the cost of vehicle excise duty (VED) increased. What we want to know is why, how has it changed and how will you be affected?

Why has VED increased?

The increase is due to the government deciding to fund the majority of road repairs and upgrades through taxes levied against you, the motorists.

VED is now linked to inflation via the Retail Price Index (RPI) and was announced as part of the 2017 autumn Budget.

Who will be affected?

The simple answer is, most new and some used cars. The annual cost will go up by £5 for most drivers but variances will depend on the age of the car, what fuel it uses and its CO2 emissions.

For most drivers, the increase will be £5 but those with older and more polluting cars will pay up to an extra £15 per year. For some new car buyers, an extra £65 will be charged on the first year VED.

Will anyone be exempt?

There have always been varying costs depending on emissions and whether your car is diesel, petrol or hybrid and this factor remains the same meaning that only electric vehicles (no exhaust emissions) will be exempt, as they were before.

In January 2020, it will be mandatory for all diesel cars to meet the RDE2 emissions standard. In the meantime, those that don’t will be hit with higher VED rates than petrol cars.

How will the increase affect me?

On cars costing more than £40,000, the tax will rise from £310 annually to £320, while similar mark ups will be applied to any car registered after 2017.

The fixed standard rate for these cars will rise from £140 to £145 for petrol and diesel models, and from £130 to £135 for hybrid models.

Will WLTP testing affect VED costs?

The WLTP test is used to measure fuel consumption and CO2 emissions from passenger cars, as well as their pollutant emissions. As a result of the WLTP fuel economy tests that replaced the former NEDC system from September 2018, means that for many new cars, VED costs have already gone up.

The amount drivers have to pay is decided via g/km which means the amount of CO2 (measured in grams) released per kilometre.

As an example, if your CO2 emissions are 91-100g per km then the cost will be £130 for petrol cars, £150 for diesel and £120 for cars using alternative fuel. At the other end of the scale, cars with CO2 emissions of more than 255g per km are looking at £2135 for petrol cars, £2135 for diesel cars and alternative fuel, £2125.

How about some good news for second-hand car owners…..

If you buy a second hand car that was registered before April 1st 2017 or if you bought a second-hand car before that date, you won’t be affected by the VED increase. Why? Because the changes only apply to cars registered on or after that date. Older cars will continue to be taxed according to the old system of CO2 emissions, so your second-hand motor will be taxed in line with the original system of CO2 emissions. Result!

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