The government’s decision to change the road tax system in the UK will hit the passenger transport industry, specifically those purchasing or leasing vehicles that cost over £40,000. These new rules will hit taxi drivers who purchase the famous London Taxi where prices for a TX4 Euro 6 auto cost over £41,000.
But it is not only taxi drivers who will be hit hard in the pocket. Chauffeurs or executive hire services who buy or lease executive vehicles, such as Mercedes S Class, Audi estate cars, Volvo S90 or V90’s will also find themselves seeing their annual road tax costs substantially increase.
When the outgoing system was conceived, taxation was linked to a car’s CO2 output – this meant that cheaper, more efficient cars paid a relatively small amount while pricier, more polluting cars paid much more.
Due to advances in engine technology and software (depending if you bought a certain brand of vehicle,) CO2 emissions have dropped across the motor industry. This improvement hit the governments coffers hard, resulting in more and more vehicles either dropping out of an annual charge or being in the lowest band.
The problem with this system emerged when it became clear to the treasury that, thanks to greatly improved engine and vehicle design, many normal cars were emitting such little CO2 that they actually fell into the tax-free bracket. This lowest band was originally intended for electric, hybrid and niche low-emission cars but, more conventional cars wound up here and paid no tax.
To bolster its cashflow, the government has introduced this new taxing regime to push more conventional cars back into taxation and reserve tax-free status for a handful of zero-emission cars.
What are the 2017 road tax changes?
As before, you’ll have to pay a first year tax rate that’s linked to the car’s CO2 emissions, followed by a standard rate for each year after that. The standard rate for every car is £140 per year but models costing more than £40,000 (after options) will incur an additional £310 cost, meaning most premium models will now cost £450 in total per year to tax.
Any zero-emissions vehicle – i.e. electric cars – won’t incur either the first year or standard rate of tax but, unlike previous years......this no longer applies to the plug-in hybrid models such as Toyota Prius, they still use a conventional combustion engine and will incur the standard rate.
If, however, your zero-emission vehicle costs more than £40,000 – such as a Tx5 London Taxi – you still incur the £310 additional cost for the first five years of ownership before returning to tax-free status.
As before, tax is no longer transferrable between owners. This means if you sell your car, the new owner will have to tax it themselves – any remaining tax on the vehicle can be claimed back from the government. Also unchanged is the £10 reduction in tax rates for alternative fuel vehicles such as those converted to run on LPG.