THERE’S no such thing as a free lunch and the days are numbered for tax-free new car motoring for many, thanks to George Osborne’s 2015 summer budget surprise shake-up of vehicle excise duty rates for 2017.
The road fund licence, abolished as such in 1936, makes a comeback under the changes from April 1, 2017, when all vehicle excise duty (VED) revenue will be devoted to road-building and maintenance.
It was inevitable, with an increasing number of modern vehicles liable for little or no VED while simultaneously using a lot less fuel and therefore contributing less in duty on a commodity which had also plummeted in price, hitting both excise and VAT returns for the Treasury.
This shake-up does not affect any current cars or those registered up to March 31, 2017.
But from the next day any new car that emits as little as one gram of CO2 per kilometre will face future financial levies, with £140 standard rate annual VED, and for alternatively fuelled vehicles (AFRs) – such as hybrids and those running on bi-ethanol and LPG – just a £10 reduction sop on first-year and standard rate in each band in subsequent years.
That’s a big leap from the present system where Vehicle Excise Duty is free up to 100g/km (Band A), giving more than 40,000 motorised road users the same tax easement as a cyclist, and tens of thousands more paying as little as £20 a year.
Only the purest electric-only cars will escape – but then only if their list price is under £40,000. One penny over, or more such as for a £60,000 Tesla S, and it gets pricey with a £310p.a. ‘premium’ rate VED for the second to sixth years.
Chancellor George Osborne broke the news in just 100 words or so, but it was something of a bombshell for a motor industry that has been diligently investing billions for carving down emissions towards the next Euro deadline in 2020.
The statement said: “This measure reforms Vehicle Excise Duty (VED) for cars first registered from 1 April 2017 onwards. First Year Rates (FYRs) of VED will vary according to the carbon dioxide (CO2) emissions of the vehicle.
“A flat Standard Rate (SR) of £140 will apply in all subsequent years, except for zero-emission cars for which the SR will be £0.
“Cars with a list price above £40,000 will attract a supplement of £310 on their SR for the first 5 years in which a SR is paid.