Vehicle Excise Duty Changes Are Coming In 2020 For ALL New Cars – And It Could Cost Brits £500 Extra

New car tax rates were introduced in 2017 and diesels will be subject to more changes from April this year

  • In 2020, rates will be updated again, the Department for Transport said

  • Car tax will align with a new emissions test that was enforced from September

  • Experts have assured drivers the changes shouldn't have an impact on costs 

  • By Rob Hull For Thisismoney.co.uk >

    Published: 09:40 EDT, 14 February 2018 | Updated: 07:22 EDT, 15 February 2018

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    For the third time in four years, British drivers will need to get their head around a new car tax system.

    Motorists have already needed to fathom out a new car tax system introduced last year, as well as higher rates for new diesel cars from April 2018 - and in 2020 they will see yet more changes to vehicle excise duty.

    The Department for Transport has proposed that car tax bands for new vehicles be adjusted in two year's time to align with a new vehicle emissions test that was made compulsory for manufacturers last year.

    While assurances have been made that costs won't increase for car buyers, the new test could see new vehicles with eco-tuned smaller engines become more expensive to tax. 

    New test, new VED rates: The Government has set a deadline for 6 April 2020 to updated car tax rates to align with the new WLTP test that has been enforced on vehicle manufacturers since September last year

    New test, new VED rates: The Government has set a deadline for 6 April 2020 to updated car tax rates to align with the new WLTP test that has been enforced on vehicle manufacturers since September last year

    The World Harmonised Light vehicles Test Procedure (WLTP) was introduced in September 2017 to better represent the real-world fuel economy of brand new cars and how much pollution they emit when being driven on the road. 

    However, car makers haven't been made to officially publish the results from the new test yet.

    The new cycle means cars have to be driven in a more realistic manner during type-approval tests, which should, in theory,  more representative emissions figures than what manufacturers have previously been quoting.

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    To further ensure the numbers are as close to what vehicles will emit when driven by customers on a day-to-day basis, a Real Driving Emissions (RDE) cycle - with measurements taken on the road - will also be incorporated into the official test for all new cars from September this year. 

    From 1 January 2019, the Government will demand that all car sellers use the new test figures on their websites, advertisements and specifications for new vehicles.

    'This will not apply to vehicles without WLTP testing figures, although there will be very few of these by this date,' the DfT report said.

    'All consumer information including government and third party publications should also use these official figures from this date,' it added.

    The move to the new WLTP test should not negatively impact vehicle taxation by increasing costs for the consumers  European Automobile Manufacturers' Association (ACEA)

    As a result of the more realistic test, many expect CO2 outputs of vehicles to be higher - and miles per gallon lower - than what the measurements we currently see.

    The European Automobile Manufacturers Association (ACEA) said the WLTP tests will 'result in a higher g/km CO2 value for a specific vehicle compared to the NEDC [the outgoing measurement], simply because it is more rigorous than the old test.'  

    With VED and car tax rates based on the CO2 outputs of cars, it means car tax bands will also need to be updated to align with the changing figures.

    However, that won't be taking place until 16 months after it is compulsory for manufacturers to quote stats based on the WLTP test.

    These are the first year tax rates that were introduced last April. Standard rate tax for electric cars from year two continues to be free, though any petrol or diesel powered car will be subject to a standard rate fee of £140 every year

    These are the first year tax rates that were introduced last April. Standard rate tax for electric cars from year two continues to be free, though any petrol or diesel powered car will be subject to a standard rate fee of £140 every year

    Buyers of new cars with a value of £40,000 or more will have to pay £310 on top of the standard rate for 5 years, taking annual tax costs for a diesel or petrol car to £450

    Buyers of new cars with a value of £40,000 or more will have to pay £310 on top of the standard rate for 5 years, taking annual tax costs for a diesel or petrol car to £450

    New rates introduced last April saw the cost of tax increase for the majority of new car buyers.

    On top of changes to first-year rates, any car other than a pure electric vehicle is subject to a standard rate of £140 every year - which drivers will first start to experience in two month's time.

    Another new ruling also means buyers of cars worth more than £40,000 have to pay a 'premium' tax of £310 on top of the standard rate for five years.

    That means any petrol or diesel powered car over that price will cost a staggering £450 to tax from year two to year six. 

    And from April this year, the Government has imposed a tax increase targeted at diesels, which will see buyers having to pay one band higher in the first year than a petrol that emits the same level of CO2. 

    Buyers of new diesel cars from April 2018 will have to pay a first year tax rate one band higher than petrol

    Buyers of new diesel cars from April 2018 will have to pay a first year tax rate one band higher than petrol

    As of 6 April 2020, CO2 figures for VED company car taxation purposes will be implemented, though there is no indication of how the scaled system will look and how much car buyers will have to pay in just over two year's time.  

    That said, the ACEA has attempted to reassure motorists that the new rates wouldn't penalise them with higher tax costs. 

    However, the association states that the move to WLTP-based vehicle taxes.

    'The move to the new WLTP test should not negatively impact vehicle taxation by increasing costs for the consumers,' it said. 

    Experts have said that eco-tuned cars - especially those with small-capacity, turbo-charged engines - will see their CO2 outputs increase the most, and therefore become more expensive to tax, though this won't have any impact on those who have bought cars before the new rates implementation in 2020.

    As such, the new test should give motorists a clearer idea of which new cars are more economical to run and better for the environment. 

    The European Commission has already set a target for car manufacturers to reduce their average CO2 per kilometre outputs to 95g by 2021, which would be a 40 per cent lower than they were in 2007.

    But with the aim based on NEDC figures, it's unclear if that figure will be adjusted to compensate for the new test. 

    Irrespective of the decision, it means drivers will once more need to grasp new VED tax rates for the third time since the first round of changes were implemented in April 2017. 

    The Government report states: 'The CO2 figure is used to determine First Year Vehicle Excise Duty (VED) and company car (Benefit in Kind) taxation. 

    'The Treasury announced in the recent 2017 Budget that from 6 April 2020, the basis for calculating these taxes will change to the CO2 figure derived from the WLTP cycle.

    'If WLTP figures are provided for comparison before this proposed date, or NEDC after this date, the provider should ensure that they are clearly marked as such.'

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    Source : http://www.thisismoney.co.uk/money/cars/article-5387159/VED-company-car-tax-rates-change-2020.html

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