What car tax changes are due in April 2020?

What car tax changes are due in April 2020?

There are several car tax changes which come into effect in April 2020. 

The UK government is increasing vehicle excise duty (VED) and is introducing a new way to measure CO2 emissions. For many drivers, especially of petrol and diesel cars, these car tax changes mean paying more VED. The way VED has been calculated was based on a car’s CO2 emissions for its first year, measured by tests using the New European Driving Cycle (NEDC). Cars were then banded.

From April, however, new tests are being used which could many cars move into new, higher bands.

From April 1, car tax bands are being based on WLPT, the Worldwide Harmonised Light Vehicle Test.

Experts say the new tests are more realistic.  They involve driving on both urban and suburban roads, including motorways, longer test distances, higher average maximum speeds, higher drive power, more realistic driving behaviour, and ambient temperatures which are more realistic.
The lab measurements are also more accurate.

VED rates for new cars will continue to be based on their CO2 emissions for the first 12 months on the road. After this, the rate will be an annual flat fee. 

This rate will be £150 per year for petrol or diesel cars. 

Hybrid vehicles are no longer exempt from the tax.

The annual rate for hybrids and liquid petroleum gas (LPG) will be £140.

When it comes to second hand cars, older cars with a fuel economy which is poorer will see a rise by one band.

VED also rises in line with the Retail Price Index (RPI), meaning an across the board rise of £5 for all vehicles.

You can see the government’s table of VED charges here.

Which vehicles are exempt from VED?

There are a range of vehicles exempt from VED, including tractors, mobility scooters, and classic cars. Here are the eight exemption categories:

  • Electric vehicles
  • Vehicles used by disabled people
  • Vehicles made before January 1, 1980
  • Disabled passenger vehicles
  • Mobility scooters, invalid carriages, and powered wheelchairs
  • Mowers
  • Steam vehicles
  • Vehicles used in agriculture, forestry, and horticulture

How will this affect BIK?

From April 6, the car tax changes will also affect Benefit in Kind (BIK) for company car drivers.

BIK rates will also be based on the new, higher CO2 figures from the WLPT tests.

BIK rates for pure electric new cars drops from 16% to zero.

That means £1023 saved in BIK tax for a company driver in the 20% tax bracket. It also means £2046 saved for a 40% taxpayer.

The rate for new plug-in hybrids with emissions from 1g/km to 50g/km will come down from the current 16% to between 3% and 12%, depending on each car's CO2 output and its electric-only driving range.

Plug-in hybrids with a range of more than 130 miles could also qualify for the zero rate. 

What if you’re buying an ‘expensive car’?

If you’re buying a car worth more than £40,000, there is some good news. The government has scrapped the £320 a year ‘expensive car’ tax for years two to six of ownership.

That could save you £1,600.

The take-away is that car tax changes are benefitting electric vehicles

The government’s aim is to use the VED and BIK system to reduce emissions, so having pure electric vehicles is now the best way to reduce the amount of tax you pay.

Are you looking for an electric car or plug-in hybrid? Take a look at our electric and hybrid range or send us a message here.

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