For years, successive governments have jiggled about with taxation systems in an attempt to baffle or shame us into paying more money than we need to. Usually, this is a highly scientific algorithm that involves CO2 emissions, incomprehensible paperwork, polar bears and lots of hormone-replacement therapy.
Let’s consider the evidence. There’s the congestion charge, surely about as helpful as a waterproof teabag and something that, to grasp even half-heartedly, requires a Masters in quantum mechanics.
Then there’s the recent legislation that forces the self-employed to file multiple tax returns each year. This is because they’re not already busy enough, obviously.
From this same wacky, save-the-polar-bear stable comes a new set of rules around VED (Vehicle Excise Duty). They came into effect on April Fool’s Day. You might not have noticed them yet, but you will if you’re buying a new car this September.
This is the biggest shake-up of the VED system since Roman times. The upshot is the government has done a load of jiggery-pokery with the tax bands. The tax on some new cars is now more expensive than the Koh-I-Noor diamond. Some, admittedly, are cheaper, but they might not be the kind of cars you’d want on your driveway.
If you own a low-emission petrol or diesel car, you’ll have noted with glee that your annual contribution to the Treasury’s coffers has been zero. No longer. Now only cars as clean as a Swiss maternity ward are exempt from VED. That means electric and hydrogen cars only.
On top of that, if your new car costs £40,000 or more, you’ll be shelling out a new five-year supplement. That’s £310 a year and starts after the first year.
Let’s look at the unfortunate case of the Lexus RC 300h 2.5 F-Sport 2-door CVT Auto. If you’re looking to buy one of these fine vehicles, your three-year cost of taxation will rise under the new rules from £30 to £1030. That’s a jump of 3333%.
In fact, most new cars will see a significant hike in first-year VED. A flat rate of £140 will then apply each year. But there is some good news. If your car’s a hybrid, or runs on LPG, bioethanol or possibly weak porridge, you’ll enjoy a magnificent £10 cut in your first year of tax. This then reverts to £130 a year thereafter.
If you’re looking for someone to blame, you could try former Chancellor George ‘Six Jobs’ Osborne, the man who added VAT to Gregg’s pasties and would probably tax your cat if it drank too much milk.
Under the old VED system, it seems we were all paying relatively small sums in road tax. This was costing the Government millions in untapped revenue every year.
The good news for existing owners is that, if your car was registered before 1st April 2017, you won’t be affected by the changes.
If you’re buying a car that’s been specifically designed to melt the icecaps, you’ll also pay more. For example, certain trims in the Honda CR-V range rise from £300 to £800. However, annual taxation after year one will fall from £220 to £140, making the CR-V a good nearly-new proposition.
In general, most new-car buyers will lose out. Smaller, more economical cars will be hardest hit and you might even pay nine times more than before.
If you’re in the market for a Toyota Aygo 1.0-litre, for example, you’d have paid £0 a year in tax before April. You’re now looking at £120 for the first year, then rising to £140.
I’m off to buy a bicycle.
VED tax bands: April 2017
|New car tax bands for cars registered from 2017|
|Emissions (g/km of CO2)||First-year rate||Standard rate|
|1-50||£10||£140 (£130 for alternative-fuel vehicles)|
|Cars costing over £40,000 pay £310 supplement for five years starting after year one|