Axon's Automotive Anorak: Road tax changes inbound

So why the panic? Well, from this Saturday, April 1st, changes to the Vehicle Excise Duty (VED) are being introduced in the UK that could see new car taxation rates climb by almost 2,500 per cent in some cases. And no, sadly this isn’t some sick April Fools day joke! 

Some new car models will command almost 25 times more VED taxation than previously, with six out of the UK’s ten best selling cars set to incur substantial tax increases. Even greener hybrid models will be hit, although some may still qualify for government grants of up to £2,500.

Recent analysis by the leading new vehicle consumer title What Car? reveals that the cost of taxing a car purchased after April 1st 2017 could increase by up to 25 times more, with even some of the most environmentally-friendly plug-in hybrids commanding sharp tax increases, particularly if they wear a desirable premium badge. 

Prestige new car brands with larger capacity engines are set to be hit the hardest by the revised VED rates, with conventional hybrids such as the Lexus GS300h and RX450h being penalised in particular. Low-emission hybrid models such as these have traditionally been an attractive option for new car buyers seeking a luxury car with small-car emissions. Under the outgoing legislation, the hybrid Lexus examples cost their owners as little as £40 to tax over three years. Under the new VED rules, however, that cost will increase to £1,030.

Under the new VED legislation, only zero-emissions cars costing less than £40,000 will be free to tax. If they are very fast though, buyers still have a couple of days to make significant savings by purchasing before the deadline. 

Sticking with the Lexus GS300h hybrid example, the near-£1,000 hike (+2,475 per cent) in the three-year VED tax bill is made up of a £150 first-year rate based on the model’s CO2 emissions, followed by two subsequent payments of the new hybrid flat rate of £130 per year, which applies to all vehicles with emissions above 0g/km CO2.

In addition, from April 1^st, all vehicles that cost more than £40,000 will be subject to a further £310 a year charge between years two and six. As a result, three-year tax bills on the ‘eco-friendly’ Porsche Cayenne E-Hybrid, Mitsubishi Outlander PHEV, Volvo XC90 T8 and Audi Q7 E-tron, for example, will also jump from zero to as much as £1,000. On the plus side, the Audi, Mitsubishi and Volvo remain eligible for a government grant of £2,500 thanks to their low CO2 emissions of less than 75g/km.

What Car? comments that motorists who flocked to buy one of Britain’s top sellers in the first months of 2017 are also likely to have avoided a hefty tax premium and could still do so if they move quickly. 

Six of 2017’s UK top 10 sellers to date are among the highest risers. Certain derivatives of the Vauxhall Astra, Ford Focus, Nissan Qashqai, Mercedes-Benz C-Class, Audi A3 and BMW 3-Series will command an extra tax bill of between £400 and £1,000 over three years. The new VED tax laws are designed to increase the advantage of running a zero emissions car, but they make things much more complicated and push up the price of many ‘bread and butter’ models. 

Longer-term this new VED taxation could re-shape the British new car market, with more expensive models with premium branding proving to be less desirable as a new car buy, with smaller, lower-capacity and less expensive models finding a wider audience.

Most new car dealers have taken full advantage of the existing VED taxation before the new system kicks in on Saturday April 1st, so lucky you if you got in there in time!