The Chancellor has also kept the promises he made during last year’s autumn budget, reiterating that fuel duty would remain frozen for this year.
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Falling revenues from VED had driven the shake-up, the Chancellor said, adding that “so many new cars now fall into the low carbon emission bands that by 2017 over three-quarters of new cars will pay no VED at all in the first year”. Owners of the cars have previously been able to avoid the tax.
“Today, the Chancellor announced that road tax (VED) income will be “ring fenced””.
And the current requirement for a vehicle to have its first MoT test three years from registration could be extended to four years.
‘This isn’t sustainable and it isn’t fair. “If you can only afford an older, second-hand vehicle, you have to pay more tax”.
However, under changes announced in the Budget, the 13 existing bands will be replaced by just three VED bands for all new cars sold after April 2017.
‘Thereafter there will be three duty bands – zero emission, standard and premium.
A flat standard rate of £140 for apply to all cars for subsequent years, except those emitting 0g/km of CO2, for which the standard rate will be £0.
Of course choosing premium fuels – which we recommend for new cars – will cost you even more.
RHA chief executive Richard Burnett said the freeze on fuel duty was positive, but that the Government could have done more: “The freeze on fuel duty continues the very positive policy of the last government and will give a massive boost to business confidence not only in the road haulage industry but the economy as a whole”.
He told MPs that “every single penny raised in vehicle excise duty in England” will go into the new roads fund to pay for “sustained investment our roads so badly need”.
What does it mean if I am buying a brand new vehicle?
Cars with a list price above £40,000 will attract a supplement of £310 per year for the first five years in which the standard rate is paid.
A Volkswagen Golf equipped with a 2.0-litre petrol engine emits in and around 139g/km, which now would result in a first year charge of £130 with a standard rate of £130. That’s a large decrease from the current average of £166.
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“This announcement will come as a relief, at a time when the prices at the pumps are reasonably stable and are less than the astronomical prices we saw previous year”. It says this move – subject to public consultation and cost-benefit evaluation – would collectively save motorists more than £100 million per year.
