With new vehicle testing coming in and a number of recent changes that will affect the amount of road tax you pay, you could stand to make a significant saving by purchasing a vehicle before 1 April 2020 for private buyers, and before 6 April 2020 for business users. That’s when the new rates of Vehicle Excise Duty and Benefit-in-Kind on Company Car Tax come in.
2020 Car Tax Increases
Why is Vehicle Excise Duty increasing? Until now, vehicle emissions were measured using the New European Driving Cycle (NEDC) test. However, this method of testing has become outdated and is not truly representative of real-life driving. Instead, it is being replaced by the Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which will provide a more realistic evaluation of your vehicle’s driving range, fuel consumption and CO2 emissions.
The result is that many vehicles could be placed in a higher tax band. That will cause the cost of your road tax to increase for the first year. So, if you’re considering buying a new Mercedes-Benz, doing so before April 2020 could potentially save you hundreds of pounds.
The impact of the initial registration fee
A first-year tax, called the initial registration fee, was introduced last April for buyers of new cars and used cars that were first registered after April 2017. The amount drivers have to pay will be determined by the CO2 emissions of their vehicle. However, this additional cost is often included in the ‘on-the-road’ price, so many car buyers may not notice it. After that initial year, any petrol or diesel-powered car will be subject to an annual standard rate fee of £145.
In a bid to speed up the adoption of the Real Driving Emissions 2 (RDE2) standards for diesel vehicles, buyers of non-RDE2 diesel vehicles will have to pay one tax band higher in the first year than a petrol car that emits the same levels of CO2. That means a petrol car that emits 110g/km of CO2 will cost £150 in road tax for the first year, while an equivalent non-RDE2 diesel will cost £170. The vehicle tax will then revert to the standard annual rate of £145 for both vehicles.
There’s also a £10 annual discount on the first-year rate and standard rate for drivers of alternatively fuelled vehicles. That includes hybrids, mild hybrids and plug-in hybrids.
|CO2 emissions||First-year rate||First-year rate for non-RDE2 diesels||First-year rate for alternative-fuel vehicles||
Standard rate (alternative-fuel)
A surcharge for cars costing more than £40,000
Petrol or diesel-powered cars that cost more than £40,000 will also be subject to a further £320 annual surcharge (up from £310 last year) that will run for five years. The surcharge kicks in after the first-year CO2-based charged. That means drivers will have to pay an additional £320 from years two to six of the car’s life on top of the annual standard tax rate. That will take the cost of road tax for all vehicles with a list price that tips the £40,000 mark to £465 a year for five years.