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What’s New with Vehicle Road Tax?

April 2018 saw changes to the government regulations for Vehicle Excise Duty (VED), more commonly referred to as road tax. This followed on from the significant changes to tax brackets brought in the previous year, in April 2017. As a result, some owners of new and used cars have seen a large difference in the amount of road tax they pay, leaving drivers of some vehicle classes better off, and others worse.

Tax discSince 2010, new cars have had a different rate of tax for their first year on the road. Known as the showroom tax, this is based on emission levels, and designed to encourage purchasers towards more environmentally friendly cars. Owners of zero emission vehicles pay nothing, while, at the top end of the scale, the one-off showroom tax rises to £2070.

One of the biggest 2018 changes is to the VED on diesel vehicles, all diesel cars have been moved up one tax bracket. In some cases, this means a jump of several hundred pounds. This is part of the UK government’s measures to discourage purchase of diesel cars, which are thought to pose a greater danger to health and the environment than petrol models. Current diesel cars do not meet the Euro 6 emissions standards using the new ‘Real Driving Emissions’ test, carried out on the road under real world driving conditions. Other extra costs on diesel car owners include higher parking rates and proposed charges to enter low emission zones in city centres.

The other significant change will affect owners of hybrid and electric cars. Under the new regulations, only zero emission vehicles pay no road tax at all. This means that hybrid vehicles using both electric and petrol power will be taxed, with some models that were previously tax free now costing over £100 per year to run.

In addition, owners of new cars that cost over £40,000 pay an extra £310 tax on top of the standard rate for their tax band. This includes high end electric cars, meaning that the tax savings no longer offset the price of the car. However, fuelling and insurance policy costs, and free parking, over the car’s lifetime may still save drivers a considerable sum. An electric car that costs less than £40,000 will still be tax free, making these models the best option if it is at all practical for you to run a fully electric car.

The changes are not backdated and only affect new models. Classic cars remain exempt from road tax, although owners must register with the DVLA and have a valid insurance policy.

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Since the new VED rates only affect new cars, it is possible for a car registered after 1st April 2017 to be in a different tax bracket to an identical model registered before that date. It can be a far better deal to buy second hand, or simply to purchase a new car that has already been registered.

As well as private owners, the motor trade is affected by the regulations since some cars have become a less desirable or economical purchase. The new rates only apply to cars, however, so drivers of commercial vehicles and vans are unaffected.

The tax changes could end up costing you a significant amount of money, every year for as long as you own the car. It is now more important than ever to find out how much road tax you will be paying on a new or used vehicle by checking its emission levels against the regulations, and to make your choice of vehicle accordingly.