Last month’s spring budget revealed Mr Hunt is increasing car tax ‘in line with RPI' - and with the Retail Price Index at 10.1 per cent, this translates to some fairly hefty price increases for us motorists.
Here’s how the new VED rises will impact you…
I am about to buy a brand new car registered after 1st April 2023
When purchasing a new car, drivers are subject to a first year tax rate, also known as a showroom tax rate, based on the car's CO2 emissions.
After the first year, owners are required to pay a fixed-price standard tax rate, which can be found in the next section below.
The recent increase in the RPI has led to an increase in VED for all car buyers except those who purchase fully-electric and plug-in hybrid vehicles emitting less than 50g/km CO2.
The increases for some drivers will be significant. Those buying the latest petrol and diesel cars with emissions up to 150g/km can expect to pay between £5 and £60 more than before April 1.
Buyers of new cars with CO2 emissions above 150g/km will be charged an additional £60 to £240, with the most polluting models subject to a first-year showroom tax rate of £2,605.
Diesel car drivers that do not meet the Real Driving Emissions 2 (RDE2) standards for nitrogen oxide emissions will be subject to a supplementary charge. To determine if a car meets the RDE2 standard, drivers can check with their car's manufacturer, or the Gov.uk payment website will automatically apply the additional charge.
I own a car registered between 1st April 2017 and 31st March 2023
If your car was first registered between 1 April 2017 to 31 March 2023, the recent RPI hike will also affect the standard rate car tax paid from the second year onwards.
This rate has increased by £15, from £165 to £180 for petrol and diesel models, and from £155 to £170 for hybrids and plug-in hybrids. Electric vehicles bought during this period are exempt from the standard rate VED, but they will face taxation from 2025 under new rules.
In addition to increasing the standard rate for combustion engine vehicles, there has been a hike in the additional "premium" rate tax for all cars purchased after 1 April 2017. This premium rate applies to all cars that cost more than £40,000 when new and is paid on top of the standard rate for five years, from year two to year six.
This premium tax has been an unwelcome expense for drivers of larger models, especially expensive SUVs, since its introduction in 2017. If you bought a £40,000-plus car new after April 2017, you'll 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 increased from £355 last year to a whopping £390 from 1 April 2022.
This means that if you own a petrol or diesel car registered after April 2017 with a list price of more than £40,000, you'll be paying £570 in standard rate tax this year, regardless of whether it produces low or high levels of carbon dioxide.
Hybrid owners get a £10-a-year discount, so owners of £40k-plus models registered after 1 April 2017 will have to pay £560 this year. For now, electric car owners are exempt from this premium taxation, but they will likely have to pay annual VED from 2025.
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I own a car registered between 1st March 2001 and 31st March 2017
If you own a petrol or diesel car that was registered between March 2001 and March 2017, the VED classification for your vehicle will continue to be based on CO2 emissions and assigned to lettered bands.
The recent RPI increase will affect all cars falling within this age bracket and with CO2 emissions over 111g/km.
As a result, the annual VED costs will rise by between £5 and £65, with the highest increase affecting the most polluting models with CO2 emissions over 255g/km, which will now be subject to a whopping £695 annual car tax.
I own a car registered before 1st March 2001
If your car is over 22 years old and was registered before 1st March 2001, you'll be facing an increase in car tax this year.
Cars in this age bracket are classified into two VED bands based on engine size - up to 1.55 liters and over 1.55 liters. For vehicles in the lower group, the increase is £20 per year, going up from £180 to £200. Meanwhile, those with larger engine capacities will face a £30 hike, going up from £295 to £325.
I own a car that's over 40 years old
You guys are the only winners here. Under VED rules, any car that was registered over 40 years ago is no longer hit with car tax.
That means all cars registered before April 1983 are already eligible for 'historical vehicle taxation' exemption. If you do own one of these vehicles, it’s important to note that it’s your responsibility to apply to the DVLA for a vehicle tax exemption so they can issue an updated log book to clarify that the car is eligible for charge-free historic vehicle tax.