Let’s talk about new car tax

Buying a brand new car is possibly one of the most expensive purchases you’ll make. It requires a lot of leg work, planning, and research. Economy, aesthetics, performance, size… there’s lots to consider. I’ve had my car for four years, and my little Toyota Aygo was perfect for when I was a nervy new driver – small, toy care engine, and about as non-scary as you could get. I’m now ready for something bigger and better, and a car that doesn’t feel like it’s going to blow away in the wind.

At £10k upwards for a new car, it has to be the right decision. But, on top of all the other factors that I need to take into consideration, I’ve just found out there are some new tax rules coming into play if you register a new car from April 1^st.

What’s odd about the new tax rules is that the smaller, more economical cars are being hit the hardest by the new tax legislation.

The road tax system is getting its biggest shake-up for 16 years, which will make some new cars significantly more expensive to run than before. Your road tax will still be based partly on your car’s CO2 emissions – in your first year of ownership, your new car will fall into one of 13 different CO2 bands to determine how much you pay. In your second year of ownership, zero-emission vehicles that cost less than £40,000 new will remain tax-free, while a flat rate of £140 a year will be payable for all petrol, diesel, and hybrid cars that cost less than £40,000.

Those of you who buy a new car that costs more than £40,000 will take the biggest hit – you’ll be slapped with an additional ‘premium’ fee of £310 for years two to five of ownership, regardless of your car’s emissions. Apparently, the money raised for this will be ploughed into improving and maintaining the UK’s motorway and roads network – this is great.

So, what does this mean for me? If I buy a new car in the 1-50 emissions bracket, my tax in the first year will be £10. My tax in the second year will jump all the way up to £140. Over four years, that’s £560. Compared with the current tax rate of £20 – £80, £560 is a lot!

While I understand why road tax is there, it feels like there is now very little financial incentive to having efficient car.

What’s odd about the new tax rules is that the smaller, more economical cars are being hit the hardest by the new tax legislation. There will be a flat rate of £140 per year, whether your car has low emissions or high emissions. Previously low emission cars had a much cheaper tax than high emission cars, but this is no longer the case. The only cars completely exempt from tax are fully electric or hydrogen cars.

So, do I wait it out until I’ve found the perfect car? Or do I rush through and order a new car before before 1^st April to avoid the tax increase? I’m not sure. But either way I’m not sure I agree with the new rules. While I understand why road tax is there, it feels like there is now very little financial incentive to having efficient car.