New road tax rules explained
The UK government has a problem. Its income from vehicle excise duty (VED, or road tax) and fuel taxes has plummeted in recent years thanks to increasingly efficient cars; it’s reckoned around a quarter of new cars pay no road tax at all. As a result, the current CO2-based system is set to be overhauled from 1 April 2017 in a bid to increase revenue from drivers. The current system sees car owners paying more VED the more CO2 their car emits. Under the new regime only pure-electric cars with tailpipe CO2 emissions of 0g/km will be exempt; all other cars will pay a flat fee of £140. However, to bump up its income further, the government is also imposing an extra annual charge of £310 on any car costing over £40,000. This is for the first five years only though; it’s to stop older, thirstier cars from quickly becoming worthless, because of the high cost of taxing them. If you buy a car with a list price of £40,000 you’ll have to pay that £310 annual supplement (for the first five years), even if it’s an electric car such as a Tesla. This list price includes any optional extras you specify, so just a few hundreds pounds worth of options could end up costing you an extra £1550 over the next five years. Incidentally, the list price doesn’t include any on-the-road charges such as number plates, fuel, delivery charges or a new car registration fee. Also, even if you negotiate a big discount it’ll make no difference; the bill you pay is based on the list price, not the transaction price.