What's new?
Did you know that the Rate of tax Vehicle owners will have to pay (Vehicle Excise Duty/VED) has been amended for most vehicles registered from 1st April 2017? Having long been planned for since the Chancellor’s Budget in 2015,the DVLA has laid out their new methodology.
In practice, the amount you will have to pay depends what category your vehicle falls under, in terms of pollutant emissions. Aside from zero-carbon emitters such as electric and hydrogen cars, all other vehicles will have to pay £140 a year as a base rate. For those that cost more than £40,000 though regardless of emissions, a new fee will apply of £310 every year for five years. After these 5 years are up, the £310 is removed and the tax rate will return to £140. However if these £40,000 plus vehicles do not give off any emissions, they will be free of the £140 constant tax.
For the majority of road users though, the rate of Excise Duty will be set via a series of ‘CO2 bands’, with the amount of tax owed dependent on the level of emissions. Similar to the methods that have traditionally been used to work out therate of tax for large trucks, the more you pollute the more you will pay. For example a vehicle emitting 111-130g/km of carbon dioxide will have to pay £160, and a vehicle within the 131-150g/km bracket will have to pay £200 a year-on top of the ever-present £140 mentioned earlier. At maximum, the heaviest polluters which are anything above 255g/km will incur a massive £2000 fee initially, but only as part of the additional rate for the first five years.
New CO2 Emission Bands
The new system also takes into consideration the fact that over the years, the price of various makes and models of vehicles will fluctuate. Therefore the value of your vehicle will be taken from the level it was when it was purchased, so you can’t look to take advantage of the system by making a purchase when the cost comes down!
Vehicles also purchased going forward from the end of March will also be divided into one of four categories. These are entitled ‘M, M1, M1SP and M1G’. Category M is your standard 4 wheeled vehicle designed for people transport, M1 is for larger vehicles but with no more than 8 seats, M1SP refers to special purpose vehicles such as ambulances and caravans, and M1G is the category for off-road vehicles like tractors. Regardless of category however, the new charges will still apply.
Why the change?
But why the need for such changes to the law? There is speculation among some that under the current system, more and more vehicles were being produced that came in below the lowest rate of tax due to technological advancements, which meant that the Government was losing out on a sizeable amount of revenue. Others believe that the decision simply underpins the Government's widerenvironmental strategyto implementClean Air Zones in Englandby encouraging the purchase of vehicles that are comparably less harmful to our quality of air. Similar laws have already been passed regarding the impact of HGV’s on the environment, so this new law may very well be part of a wider sequence, with more eco-friendly roads and cleaner air zones as the ultimate goal.
Check what you will pay
These changes to the law however, are quite complex for someone without a financial background to fully understand. If you’re still unsure over any elements of these changes and how they’ll effect you theVehicle Certification Agencyhas a very helpful and simple to useVehicle Tax Calculatorto check what you will pay.
If you are experiencing problems paying your essential bills or your credit debts,please get in touch with Money Advice Hub, we'll be pleased to help you.
Guest Blogger: Justin Fox, Digital PR Executive,Distinctly PR
