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Beat the new car tax

April 2017, the system used by the government to tax cars in the UK changed drastically (and in a fairly complex way). It’s thrown up a few inconsistencies with the whole idea of penalising gas-guzzlers, which could be viewed as a total face-palm by the environmentally conscious, or as a lucky loophole by anyone looking to buy a fuel-hungry vehicle. The main factor depends not on fuel type, whether on trade plates or the vehicle size, but on the price: the magic number being £40,000.

Beat the new road taxNew and used cars driving side by side on a dual carriageway are now subject to different road tax boundaries, with any cars registered before 31 March 2017 coming under the old system. In that category, some will be paying heavy levies year after year (one example being the Ford Mustang, costing £1120 in road tax for its first year, and £515 each year after that). Now, the Mustang is a V8 so it’s not skipping gently through the fields, hugging trees and replanting the rainforest… Hence the whopping taxes. But now that the road tax revamp has taken place, the first year is definitely pricier (two grand for year one), but each year after that it’s only £140, making major savings in the long-run.

But how so? This only works out because the purchase price is under that magic £40,000 ceiling. The UK government had intended to create a more progressive tax, asking larger amounts for premium vehicles, and thereby shouldering the cost onto richer drivers, as opposed to more hard-up folk who would be buying older cars, which are less environmentally friendly and more heavily taxed. In principle, it works, but by issuing the arbitrary £40,000 boundary, someone buying a Mustang and ragging it for everything its worth is going to end up paying less than someone who buys a top-end Prius with all the trimmings and drives it carefully to church once a week.

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So other than the cost of your insurance policy, which obviously won’t come under the purchase price, do look carefully at whether adding extras at the time of buying is going to take your car over the £40,000 limit. That plush interior or chrome gearstick could be costing you a LOT more in the long term!

And what about drivers with fat wallets who don’t want to fork out extra under the new system? Savvy drivers who couldn’t help but buy a flashy car above the £40k bracket all rushed to make their purchases before the change came in on April 1st, with a clear surge in purchases in March (more than £562,000 in total), drastically beating new car registrations in March of any year from 2001.

Nobody said the motor trade had to make any sense!