Following on from the article in our last E-news about changes to car benefit rules which adversely affect low emission cars over the next few years, it is also worth highlighting the changes to the vehicle tax regime which now apply from 1 April 2017.
Previously, low emission cars (less than 100g/km) had been exempt and therefore paid no vehicle tax.
For new cars registered on or after 1 April 2017, the vehicle tax in the first year will be based on CO2 emissions, but for the second year onwards, a standard rate of £140 (£130 for alternative fuel cars) will apply in each year. Only zero emission (i.e. electric) cars will continue to be exempt.
In addition, for expensive cars (over £40k) there will be a surcharge of £310 p.a. applying in years 2 – 6 (i.e. an extra total of £1,550 over the life of the car). In terms of determining whether the £40k cost threshold is met, the list price, delivery charge, and manufacturer-fitted options all count towards that limit (so choosing a few pricey options on a car with a list price of say £38,500 could tip you over the limit and be costly). In addition, when buying a plug-in hybrid car which qualifies for the Government grant, that grant is ignored for the purposes of the £40k limit (i.e. if the grant reduces the cost to less than £40k, it won’t matter – you’ll still be hit by the £310 p.a. surcharge).
Perversely, the higher emissions cars will benefit most under the new regime, whereas low emission cars will lose out compared to the old system.
Remember that the new system only applies to cars registered after 1 April 2017, so if you had intended to upgrade your low-emissions car for a newer model (also low-emissions) be prepared to be caught by the new rules or perhaps buy a second hand model instead.