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Why your eco-friendly car could cost you more from April 1

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February 20, 2017
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New car owners could be forgiven for thinking they’ve been taken for a fool when Vehicle Excise Duty rules change and leave them further out of pocket from April 1.

The change will mean 7 out of 10 will have to pay more tax and some of the most popular eco friendly cars will cost them more than £900 extra over five years.

From April 1 only electric and hydrogen cars will be tax exempt – all others will pay a flat rate of £140.

A car emitting 99g of carbon-dioxide emissions per kilometre bought before April 1 will be free of road tax for life, but those bought after that date will cost £120 in the first year, and £140 each year after.

Other changes include the following:

Car emissionsTax prior to April 1, 2017Tax after April 1, 2017
131g CO2/km£130£200
151g CO2/km£180£500
171g CO2/km£295£800
191g CO2/km£490£1,200
Over 255g CO2/km£1,100£2,000

Those buying high-polluting cars may actually break-even, with tax set higher in the first year and subsequently falling every year after that.

The current structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178g CO2/km.

The Band A threshold of 100 g CO2/km below which cars pay no VED was introduced in 2003 when average new car emissions were 173g CO2/km.

Since then, to meet EU emissions targets average new car emissions have fallen to 125g CO2/km.

An increasingly large number of ordinary cars now fall into the zero or lower-rated VED bands, meaning they pay nothing at all resulting in lost tax revenue for the Treasury.

It will be even worse for those who want to buy luxury or low emissions cars. Currently, they are tax free but the cost will rocket to £310 a year from the second year of ownership. Cars worth more than £40,000 that produce emissions will have to pay £450 a year in years 2-6.

AA president Edmund King holds the view “if it ain’t bust, don’t fix it”.

He said: “The current graduated VED system works well and encourages drivers to opt for more fuel-efficient vehicles. Whilst our members realised that the system needed to be reformed they think the proposed system will not encourage the take-up of lower emission vehicles.

“In the new VED system, only pure electric or hydrogen fuel cell cars will qualify for the lowest band. We believe the current system could have been reviewed to give more incentives for those that opt for lower emission vehicles.

“The Government impact assessment predicts a surge of band A, B, C sales prior to start date. After which two identical cars in driveways next to each other would have VED at £0 p.a. or £140 p.a.”

Click here for a full table of the new tax bands.

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