Buyers of lower-emission cars are expected to bear the brunt of changes to Vehicle Excise Duty (VED) car tax from next April 2017, with those in the 91-100 g/km of CO2 band hardest hit, seeing costs over six years rise from nothing to £820.
Research conducted by Parkers suggests that of the estimated £5.2 billion of additional revenue the new VED rules will generate by 2023, £4.7 billion will be from buyers of cars emitting 1-130 g/km of CO2, all of which are currently tax-free for the first year.
Initially, the 2017 VED system appears to be an update of the existing scheme, albeit with new bands created and others combined. Notably, only buyers of cars with zero CO2 emissions will have the ability to remain car tax-free under the First Year Rate, as any model producing even 1 g/km of CO2 will be subject to a charge from next year.
There’s a further surcharge for cars with a list price of £40,000 or higher – regardless of emissions, an annual charge of £310 from year two through to six will be imposed.
Buy a new car emitting just 99 g/km of CO2 from April 2017 and instead of enjoying VED tax-free motoring, you’ll instead be lumbered with an £820 tax bill over the first six years of ownership.
Replacing the Standard Rate sliding scale for year two onwards will hit buyers of cleaner cars and effectively provide a financial incentive to purchase models which pollute most. Zero-emission cars again remain free, but all others face a yearly bill of £140.
Premium plug-in hybrids also take a whack despite their greener credentials. Select one with emissions quoted at 50 g/km that also costs over £40,000 and by the time it’s six years old its owner will have contributed £2,260 to the Treasury instead of nothing under the present rules. Meanwhile, those who opt for a high-polluting car priced below that £40,000 cap will actually be up to £925 better off under the new scheme after six years.
While Ecolane agrees with Parkers and Next Green Car in supporting the use of future VED revenues to pay for road network improvements, we strongly oppose the new VED tax regime from 2017 as it unfairly penalises owners of most low emission cars, while simultaneously reducing the tax bill for the heaviest polluters. It will also have a detrimental impact on emissions from road transport.
Next Green car’s director Dr Ben Lane commented: “The forthcoming change in VED tax from April 2017 will undermine the huge progress made since 2001 in aligning car tax with CO2 emissions as one of several price signals aimed at encouraging the purchase of low carbon cars. It will also break the link with company car tax which will continue to be based on CO2 emissions; a tax system with a proven record of incentivising low carbon vehicles.”
Ben Lane added: “Along with many other motoring organisations, we will be campaigning during 2016 for the planned changes in VED taxation to be scrapped and replaced with a sliding scale based on emissions.”
Original research conducted by Parkers.co.uk