How Budget 2015 Affects UK Motorists

Chancellor George Osbourne has announced the Summer 2015 budget, and has pledged to overhaul the UK’s car taxation system. This will include a ‘premium’ car tax to vehicles worth over £40,000. With modern cars emissions falling all the time, the existing CO2-based set-up which has existed for the last decade grows increasingly out of date, meaning many cars these days either pay no road tax or very little.

A new set up will be launched n April 2017 to combat these changes, and make sure that nearly every car on the road has to pay tax.

Osborne has claimed that over three quarters of new cars would pay no VED at all in their first year if the current system continued by 2017, and his new system will change that. Put simply, first year’s tax for vehicles registered after April 2017 will still follow the CO2 guidelines, but after the first year there will be just three rates: zero-emissions (free), standard (£140 applying to 95% of cars on the roads today) and ‘premium’ car tax (a supplement of £310 a year for cars over £40,000 list price new). These changes apply only to vehicles registered after 2017: all existing cars on the roads will pay at today’s rate.

The UK's new car tax system from April 2017

Company car tax rates for 2019-20 will continue to be based on a percentage of list price, but the tax will increase by 3% for cars emitting more than 75g/km of CO2 from 2019-20 – up to a maximum rate of 37%. The cleanest company cars will have to emit 0-50g/km of CO2, with further bands at 51-75g/km and 76-94g/km.

However, there is some better news to come from this, as the government will extend the deadline for the first MOT of new cars from three years to four years, subject to consultation. The government believes this will save UK motorists £100 million annually.

So to sum up;

New tax disc system from April 2017 for new cars
Existing cars will use today’s CO2 brackets
From 2017 new cars pay ‘standard’ or ‘premium’ tax
95% of motorists will pay £140 a year ‘standard rate’
‘Premium’ cars over £40,000 will carry a £310 supplement for five years
Cars that emit the over 225g/km to pay £2000 in first year
New ‘premium car tax’ for vehicles over £40,000
MOT tests only applicable after four years

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