Continued Use of Ved Increase Length
Vehicle Excise Duty costs will rise for most drivers from 1 April 2020 - but especially so for those in the market for a new car.
As expected, the Chancellor confirmed that VED, as car tax is officially known would rise in line with the Retail Price Index, with the biggest increase being £10 for owners of the most polluting models.
However, the cost of owning a brand new petrol, diesel or hybrid car from this month will jump dramatically.
That's because the Government has now switched to the latest (and more accurate) measure of carbon dioxide emissions that determine which first-year VED band a vehicle is in - and the average increase for new models will be £300.
Car tax costs are going up for many drivers from 1 April 2020. Use our tools and tables to find out how much your VED is going up this year
If you're reading this story in the MailOnline app you will be unable to use our car tax tools - click on this link to view it on our website to get access to the interactive VED look-ups.
While the changes are likely to see an increase in car tax costs for many motorists, it's electric cars buyers - and those who have purchased zero-emission models recently - who are going to benefit from cheaper tax.
And there could be more bad news on the horizon, as the government has hinted it could hike VED again in the near future as part of efforts to encourage more people to drive low-emission vehicles.
Here's how it VED changes introduced on 1 April 2020 affect you, And you can use our handy tools to find out how much your car tax bill will be increasing from this month.
Blow number 1: VED bands to increase in line with RPI
Chancellor Rishi Sunak confirmed in last month's budget that VED rates would continue to rise in line with inflation in line with the RPI.
How this impacts cars registered between 1 April 2017 and 31 March 2020
For owners of cars bought after 1 April 2017, this will result in a small hike in standard-rate car tax (paid from the car's second year onwards) of £5.
The standard rate tax for all vehicles - no matter what its CO2 output - is rising from £145 to £150 for petrol and diesel models and increasing from £135 to £140 for 'alternative fuel vehicles', including hybrids and plug-in hybrids purchased between April 2017 and the end of March 2020.
The standard rate for VED for electric cars bought during this period is zero.
| Fuel type | Standard rate 2019-2020 | Standard rate 2020-2021 | Increase |
|---|---|---|---|
| Petrol or diesel | £145 | £150* | £5 |
| Alternative fuel (hybrid) | £135 | £140* | £5 |
| Electric | £0 | £0 | £0 |
| *models with a 'list price' (the published price before any discounts) of more than £40,000 to pay an additional premium tax of £325 for the first 5 years of the standard rate | |||
As well as increasing the standard rate for all vehicles with a combustion engine, there has also been a hike to an additional premium rate tax for models that cost more than £40,000 when new.
This premium rate is paid on top of the standard rate from year two for five years. So if you bought your £40,000-plus car new in April 2017, you will be paying the premium rate on top of the standard rate from April 2018 to April 2022.
The cost of this 'expensive car' tax has risen from £320 to £325. That means if you drive a petrol or diesel car with a 'list price' (the published price before any discounts) of more than £40,000 in the last three years, the standard rate of tax is a whopping £425 (£415 for alternative fuel vehicles), irrelevant of if it produces low CO2 or extremely high levels of carbon dioxide.
As part of efforts to reward electric car buyers, this expensive car taxation has been lifted for zero-emission models bought during this period, saving owners up to £1,625 if they bought a battery-electric car last year.
Electric cars bought after 1 April 2017 are now exempt from the expensive car tax, which will see owners save £320 a year on their running costs
How RPI increase affects older cars registered between 1 March 2001 and 31 March 2017
For older petrol and diesel cars registered between March 2001 and March 2017, the impact of the RPI impacts cars with CO2 emissions in excess of 131g/km CO2.
Annual VED costs will rise between £5 to up to £10 for the most polluting models with CO2 emissions of 226g/km or more.
For alternative fuel vehicles and electric cars (free), there has been no increase in VED, according to the Government's website.
The table below outlines the changes for cars first registered from March 2001 to the end of March 2017.
| VED Band | CO2 emissions (g/km) | 2019-2020 Standard rate* for PETROL AND DIESEL cars | 2020-2021 Standard rate* for PETROL AND DIESEL cars | Increase | 2019-2020 Standard rate* for ALTERNATIVE FUEL VEHICLES | 2020-2021 Standard rate* for ALTERNATIVE FUEL | Increase |
|---|---|---|---|---|---|---|---|
| A | Up to 100 | £0 | £0 | £0 | £0 | £0 | £0 |
| B | 101-110 | £20 | £20 | £0 | £10 | £10 | £0 |
| C | 111-120 | £30 | £30 | £0 | £20 | £20 | £0 |
| D | 121-130 | £125 | £125 | £0 | £115 | £115 | £0 |
| E | 131-140 | £145 | £150 | £5 | £135 | £135 | £0 |
| F | 141-150 | £160 | £165 | £5 | £150 | £150 | £0 |
| G | 151-165 | £200 | £205 | £5 | £190 | £190 | £0 |
| H | 166-175 | £235 | £240 | £5 | £225 | £225 | £0 |
| I | 176-185 | £260 | £265 | £5 | £250 | £250 | £0 |
| J | 186-200 | £300 | £305 | £5 | £290 | £290 | £0 |
| K** | 201-22 | £325 | £330 | £5 | £315 | £315 | £0 |
| L | 226-255 | £555 | £565 | £10 | £545 | £545 | £0 |
| M | Over 255 | £570 | £580 | £10 | £560 | £560 | £0 |
| **Includes cars emitting over 225 g/km registered before March 23, 2006 | |||||||
RPI rise impact on all older cars registered before 1 March 2001
For the oldest vehicles registered before 1 March 2001, VED is split into just two bands based on engine size - up to 1.55 litres and over 1.55 litres.
Both have seen an increase of £5 from April 2020 - up from £160 to £165 for the smaller engine group and up from £265 to £270 for the larger engine capacities.
Classic models over 40 years are exempt from VED on a rolling basis, meaning all models registered before April 1980.
Blow number 2: First year VED rates determined by WLTP test cycle for the first time - making new cars pricier to tax
Unlike the standard rate of tax for all cars registered since April 2017, the first-year rate of car tax isn't a flat rate and is instead determined by the car's 'official' CO2 emissions.
These emissions are the figures measured during type approval testing using the NEDC test cycle.
From 1 April 2020, the CO2 emissions determining which tax band a car fits into is based on the results of the new cycle, the WLTP fuel economy tests.
This is a more realistic interpretation of actual driving on the roads, and therefore generally produces higher CO2 emission readings.
This means cars could jump into higher tax bands due to how their CO2 is calculated.
As an additional blow, diesel cars that don't meet RDE2 emissions standard – which became mandatory in January 2020 – will continue to be pushed into one VED band higher than a petrol vehicle with the exact same CO2 output.
The new WLTP test cycle finds that car CO2 emissions are higher by 20% on average, ultimately pushing new cars into higher first-year VED bands than they were in previously
First-year VED bands also being hit with the RPI rise
The impact of the RPI hike increases some VED band, ranging from £5 to £40 for all models producing more than 91g/km CO2 (see increases in table below). This makes the most-polluting new petrol and diesel cars a massive £2,175 to tax in the first 12 months.
The combination of the switch to the WLTP cycle and the impact of RPI will make the average new petrol or diesel car £300 more expensive, says vehicle valuations expert cap hpi.
With the car industry already hard-pressed by a huge decline in registrations of new models due to uncertainty about the future values of diesel models and the impact of Brexit on new prices, a rise in running costs for vehicles with internal combustion engines is another hit for the sector.
It says the new test cycle increases the average combustion-engined car's CO2 outputs by 19.7 per cent, almost certainly pushing new models into higher VED bands from this month.
The average CO2 output of passenger cars has jumped by 26g/km - from 135g/km CO2 in the old test (NEDC) to 161g/km CO2 under WLTP.
The MPV sector will see the biggest increase of a third (33 per cent) followed by large executive cars (30 per cent rise) and SUV (29 per cent jump). The smallest percentage increase was seen in the supercar sector at just 8 per cent.
Jonathan Clay, head of vehicle identification at cap hpi said: 'The combination of the introduction of WLTP and a new tax regime aimed at encouraging private drivers and fleets to make greener motoring choices has driven up costs across the board.'
| Emissions (g/km) CO2 | First year rate PETROL and RDE2 DIESEL cars 2019-2020 | First year rate PETROL and RDE2 DIESEL cars 2020-2021 | Increase | First Year rate for non-RDE2 DIESEL cars 2019-2020 | First Year rate for non-RDE2 DIESEL cars 2020-2021 | Increase | ALTERNATIVE FUEL cars 2019-2020 | ALTERNATIVE FUEL cars 2020-2021 | Increase |
|---|---|---|---|---|---|---|---|---|---|
| 0 | £0 | £0 | £0 | £0 | £0 | £0 | £0 | £0 | £0 |
| 1-50 | £10 | £10 | £0 | £25 | £25 | £0 | £0 | £0 | £0 |
| 51-75 | £25 | £25 | £0 | £110 | £110 | £0 | £15 | £15 | £0 |
| 76-90 | £110 | £110 | £0 | £130 | £135 | £5 | £100 | £100 | £0 |
| 91-100 | £130 | £135 | £5 | £150 | £155 | £5 | £120 | £125 | £5 |
| 101-110 | £150 | £155 | £5 | £170 | £175 | £5 | £140 | £145 | £5 |
| 111-130 | £170 | £175 | £5 | £210 | £215 | £5 | £160 | £165 | £5 |
| 131-150 | £210 | £215 | £5 | £530 | £540 | £10 | £200 | £205 | £5 |
| 151-170 | £530 | £540 | £10 | £855 | £870 | £15 | £520 | £530 | £10 |
| 171-190 | £855 | £870 | £15 | £1,280 | £1,305 | £25 | £845 | £860 | £15 |
| 191-225 | £1,280 | £1,305 | £25 | £1,815 | £1,850 | £35 | £1,270 | £1,295 | £25 |
| 226-255 | £1,815 | £1,850 | £35 | £2,135 | £2,175 | £40 | £1,805 | £1,840 | £35 |
| Over 255 | £2,135 | £2,175 | £40 | £2,135 | £2,175 | £40 | £2,125 | £2,165 | £40 |
WLTP test cycle will also impact Benefit in Kind company car tax
The WLTP measurements will also come into force for BiK from 6 April 2020.
Vehicles registered after this date will be taxed using the new WLTP CO2 emissions values. The values will relate to the specific configuration of an individual vehicle, taking optional equipment fitted to the vehicle into account for the first time.
Large executive vehicles saw the most substantial increase in VED at £546, followed by executive, £459, and MPV, £455. City car and supercar saw the smallest increases with £52 and £40, respectively, cap hpi says.
On average diesel vehicles saw CO2 increase by 30 grams while petrol-hybrid vehicle rose by 29.3 grams. Diesel plug-in hybrids saw CO2 decrease by 1.9 grams on average.
The petrol hybrid, petrol and diesel sectors all saw increases in BiK of 4.1 per cent, 2.6 per cent and 2.5 per cent respectively. Petrol plug-in hybrid saw a decrease of 5 per cent and diesel plug-in hybrid of 5.5 per cent.
The diesel sector saw the largest increase in VED of £423 on average, followed by petrol, £232, and petrol hybrid, £180. Petrol plug-in hybrid only saw a rise of £6 while diesel plug-in hybrid saw no increase.
Benefit in kind tax rates for EVs slashed
Drivers of electric company cars will also benefit from new tax changes with BiK for zero-emission models being cut to 0 per cent, down from 16 per cnet as of Monday 6th April.
This mean drivers will be able to save thousands of pounds on zero emissions vehicles through salary sacrifice schemes.
To find out more, read This is Money editor Simon Lambert's full comment piece on the huge savings available.
Poppy Welch, head of Go Ultra Low, the joint government and industry campaign to promote the uptake of electric vehicles, said: 'The Government's Benefit in Kind tax rates are the latest of a host of benefits on offer for people considering the switch to electric.
'We'd encourage prospective EV drivers to take advantage of this incentive which will lower the monthly company car payments for electric cars significantly, and give employees the financial freedom to choose from a wide range of vehicles.
'These changes will complement the existing benefits of driving electric, including lower running costs, a quieter, smoother drive and the flexibility of charging from home.'
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Source: https://www.thisismoney.co.uk/money/cars/article-8168453/Car-tax-increase-VED-costs-rise-drivers-April-2020.html
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