Car Tax – another unexpected rise that’s gone under the radar, increased on 1^st April 2024.

The Spring Budget statement last month that fuel duty would remain frozen for a fourteenth consecutive year – and the 5p cut on tax on petrol and diesel would remain for another 12 months for drivers and businesses.

But while the Government has refrained from hiking taxes on fuel, there’s still a sting on motorists that came into effect on 1 April – Vehicle Excise Duty, otherwise known as Car Tax.  VED – or Car Tax, as it’s often referred, went under the radar in the Budget. An increase in rates in-line with the Retail Price Index was buried in the official document and means the cost of taxing a car is likely to increase for most drivers over the next 12 months.

The Car Tax increase on you will depend on factors such as the age, fuel type, and emissions of your vehicle.

• Vehicle Excise Duty bands (Car Tax) have risen in-line with the Retail Price Index, affecting both new and older cars

• Most owners of petrol, diesel and hybrid vehicles will see their annual car tax costs rise by £5 to £140 a year

• Premium tax on £40,000-plus cars rises from £390 to £410 on top of the standard rate

What is the Car Tax (Vehicle Excise Duty) and how will it affect you?

The Vehicle Excise Duty (VED), commonly known as car tax or road tax, is a tax levied on vehicles in the UK. The amount of VED you pay depends on various factors, including the vehicle’s fuel type, CO2 emissions, and its date of registration. Changes in VED rates can impact you differently based on the age of the car you drive. Here’s a breakdown of how the increase in VED in the UK might affect you based on the age of your car:

1. New Cars (First Year Rates):

1. • For brand new cars, the first year’s VED rates are based on CO2 emissions. There are usually several bands, with higher emissions attracting higher tax rates.

1. • The impact of the VED increase will depend on the CO2 emissions of the specific model of car you purchase.

1. • If your car emits a high level of CO2, you may see a significant increase in the first-year VED rate.

1. • Conversely, if your car is low-emission or electric, you may see little to no change in the first-year VED rate.

1. Subsequent Years (Standard Rates):

1. • After the first year, VED rates are typically lower and are based on fuel type and the date of registration.

1. • For petrol and diesel cars registered before April 2017, VED rates are based on CO2 emissions, with higher emissions resulting in higher tax rates.

1. • For cars registered after April 2017, the standard rate is a flat fee, with zero emissions vehicles exempted.

1. • The VED increase might lead to higher standard rates for cars with higher emissions, impacting owners of older petrol and diesel vehicles particularly if their emissions fall into higher tax bands.

1. • Electric and low-emission vehicles may remain unaffected or could potentially benefit from any exemptions or reductions introduced alongside the VED changes.

1. Historic Vehicles:

1. • Historic vehicles (those over 40 years old) are exempt from VED. This exemption is not affected by the VED increase.

1. • If you own a classic car or a historic vehicle, you won’t be directly impacted by the VED increase.

1. Alternative Fuel Vehicles:

1. • Owners of alternative fuel vehicles such as hybrids and plug-in hybrids may see varying impacts depending on the specific VED policies related to these vehicles.

1. • Some alternative fuel vehicles receive reduced VED rates or exemptions as an incentive to encourage their use.

1. • Any changes to these incentives could affect the cost of owning and running alternative fuel vehicles.

Overall, the impact of the VED increase on you will depend on factors such as the age, fuel type, and emissions of your vehicle. If you’re considering purchasing a new car or if you already own a vehicle, it’s advisable to check the specific VED rates applicable to your situation to understand how the changes will affect you financially.