Budget 2015: Road tax reform for new cars – BBC News

Frozen duty: George Osborne announced fuel duty was frozen once more.

For cars registered after 1 April 2017, VED will be transformed into three bands – zero, standard and premium.

“Effectively, this would mean that the majority of cars owned by fleets would never need to be MOT’d because they are on shorter cycles than four years, which is a definite gain in terms of both costs and reduced hassle surrounding defleeting”. It is this shortfall that has prompted the shake-up and the return to a more direct “road tax” system for the first time since 1937.

The new rates won’t apply for the first year after the car’s registration, however.

‘This isn’t sustainable and it isn’t fair.

Only totally zero-emissions cars (generally electric and hydrogen-powered models) will remain exempt from road tax. “If you can only afford an older, second-hand vehicle, you have to pay more tax”. While the cost of road tax will be set according to emissions, as today, the bands will be updated in line with new technology.

George Osborne said the “standard” charge of £140 would cover 95% of all cars. But it won’t happen yet – the revenue will start to be paid into the Roads Fund from 2020-21.

‘From the end of this decade, every single penny raised in VED in England will go into that fund to pay for the sustained investment our roads so badly need, ‘ he said.

However, the prospect of higher taxes could put off motorists from buying new cars.

That is still down significantly on previous year.

Rumoured increases in Fuel Duty could have seen the price of fuel rise by over £5 per 50-litre tank, which would have equated to an additional annual spend of around £500 for a daily commute of 20 miles.

The Chancellor said one of the first pieces of advice he received in the Treasury was to cancel the plan for the Crick Institute, Tate Modern extension and Crossrail – but he said he rejected that advice, because he has always believed it is our nation’s great advantage that we have one of the world’s great capitals. Buyers paying over £40,000 for their auto will have to pay extra, though – attracting a £310 supplement above the standard charge for the first five years. That means from 2017 the first year rate will increase from £870 now to £1,200, while the flat rate will increase from £290 to £450 considering the car’s list price.

Simon Greiner, managing director at auto finance group Red Potato, added: “The rising cost of living is having a major impact on thousands of people across the United Kingdom already struggling with their personal finances”.