Changes to vehicle tax on diesel and company cars
Back in 2017, the government brought in some changes to how vehicles in the UK are taxed, introducing a new set of vehicle excise duty bands affecting all new car buyers. The changes were significant, and saw higher first year fees for all new cars, as well as replacing subsequent states with a blanket £140 rate. Under these changes, both diesel and petrol cars are now generally more expensive to tax with only electric and other cars that have zero emissions being able to claim tax-exempt status.
However, the changes don’t end there. In his Autumn Budget, the Chancellor Philip Hammond announced further amendments to the ways that vehicles are taxed in the UK. He announced that all new diesel cars from 1 April 2018 will face going up a VED (vehicle exercise duty) band if they fail to meet the latest Euro 6 standards under real-world and laboratory testing.
April 2017 tax bands compared to those to be introduced in April 2018
As you can see from the following figures, the changes are quite significant, with some people having to pay four times more under the new system to tax their diesel car.
1 - 50 g/km CO2
From 2018: £25
51 - 75 g/km CO2
Current rate: £25
From 2018: £100
76 - 90 g/km CO2
Current rate: £100
From 2018: £120
91 - 100 g/km CO2
Current rate: £120
From 2018: £140
101 - 110 g/km CO2
Current rate: £140
From 2018: £160
111 - 130 g/km CO2
Current rate: £160
From 2018: £200
131 - 150 g/km CO2
Current rate: £200
From 2018: £500
151 - 170 g/km CO2
From 2018: £800
171 - 190 g/km CO2
Current rate: £800
From 2018: £1,200
191 - 225 g/km CO2
Current rate: £1,200
226 - 255 g/km CO2
Current rate: £1,700
From 2018: £2,000
Over 255 g/km CO2
Current rate: £2,000
Under the changes, some versions of popular family cars such as the Volkswagen Tiguan, the Ford Kuga and the Land Rover Discovery will cost £315 more to tax than an equivalent petrol car.
What about company cars? Are there tax changes for them?
Yes. In the Autumn Budget, the Chancellor, Philip Hammond announced that the existing company car tax diesel supplement that is currently set at 3% will increase to 4%. This increase will be applied to diesels that fail to meet the new RDE (real driving emissions) real-world economy criteria, which are being introduced as part of the new WLTP (Worldwide Harmonized Light-Duty Vehicles Test Procedure) efficiency standards. These measures will help fund the new £220 million Clean Air Fund that was also announced in the Autumn Budget; a budget that is designed to help to improve air quality around the UK.
Is it the end for diesel cars?
There’s no doubt that there does seem to be a crackdown on diesel cars happening at the moment.
Drivers are facing a range of extra charges including some car owners, (many of whom drive diesel cars) being hit with the Emissions Surcharge in London that targets all cars with an engine that fails to meet Euro 4 emissions standards. Owners have to pay a £10 addition to the £11.50 Congestion Charge, resulting in a total charge of £21.50. By the end of 2020, some people think that there could be over 25 other areas of the UK also imposing charges on older diesel cars. However, this is hotly disputed with other experts not expecting other towns and cities to follow suit.
But does that mean it is game-over for diesel cars and that you should only now consider buying a petrol or alternatively fueled car?
It’s actually not that simple, and these increased charges should be looked at from a wider perspective. Whilst there’s no doubt that owning a diesel car has now become more expensive in some respects, for some people it still may represent the best choice for their particular needs and circumstances and may still be the most cost-effective options.This is down to three main factors.
Three reasons why it’s not game over for diesel cars
Firstly, many diesel cars have excellent MPG figures, significantly exceeding their petrol equivalents. That means that those people who do a lot of mileage may find it cheaper overall to own and run a diesel car than a petrol car.
Secondly, for those people purchasing a second hand diesel car, they may find that prices are particularly attractive. With a perceived focus on diesel being targeted by the government and other bodies, it could lead to a glut of used diesel vehicles on the market, forcing used prices down.
Thirdly, it’s also important to remember that the rise in diesel road tax and company car tax is temporary, and will not apply to those cars that meet next-generation emissions standards, due to come into force in 2021. The situation potentially could change significantly.
If you’d like advice on your next car purchase, why not give us a call on 01625 619 944