New car VED

is200 Newbie · May 3, 2016

Is this price hike in 2017 going to make a newer used car more desirable in order to avoid these hikes in the cost of tax?

rayaans · May 3, 2016

Depends. if Its over £40k you'll get hit with £450 each year until its 5 years old anyway.

Should make high polluting cars more desirable after the first year though as they pay the same £450 as even the greenest cars over £40k

Shahpor · May 4, 2016

Well, since I generally buy cars that are over 5 years old, it is good news for me.

Not really bothered about first year tax since I would just consider it as part of the cost of buying the car.

The £40k+ £450 premium for the first 5 years is a little steep, but I suppose if you get a petrol non hybrid car, it would generally be cheaper than it is now.

So not bad really. Also, I never did like the idea of pollution being linked to road tax, since it was meant to be for using the road and road repairs.

Linas.P · May 4, 2016

20 minutes ago, Shahpor said:

since it was meant to be for using the road and road repairs.

Well .. officially it isn't and never was. What you are referring to is the period between 1920 and 1937 when "Road fund" was implemented and road expenditure directly linked to collected duties.

Personally, I am in complete agreement with you VED = road tax... it can be called "pollution tax", "air tax", "nonsense tax" or anything else, but it will always stays "The Road Tax". Very easy to prove it - if you don't use your car on public road you don't need to pay it, so if you do use it you pay it for using road and not for some another reason. Based on that my opinion is - not only should it be linked to road expenditure, but as well subsidised from general taxation for stuff like bus lanes, cycling lanes etc. - which is not directly benefits "Road tax" payers (or in reality negatively impacts them). Sad reality is actually opposite, see nice graph illustrating it since 1979:

Now the Government regards it as vehicle tax to cover "something"... it is not very clear what it is covering, but principal is simple - "you have car, means you are rich, so we take random tax form you and pretend that we are Philanthropists from money you paid". It is not linked to road maintenance and in no way secured for such purpose. In fact government was heavily under-investing to road infrastructure for last 40 years (as can be seen above) and at any given year they spent less than 30% of VED and fuel duties on road maintenance. Even then that 30% includes things completely unrelated and irrelevant for drivers who actually pays for using the roads e.g. bus stops and lanes, cycling superhighways, subsidies for rail-work and city buses etc.

Speaking of new VED rules - they are designed to catch tax loophole - low emission supercars e.g. BMW i8 or other luxury cars which previously were able to avoid taxation or use lower tax bracket. I guess this is preemptive tax for hydrogen powered cars etc. so that in future they cannot avoid paying taxes. It accident ally can have "positive" impact - people will buy more powerful expensive cars, because there will be no tax benefits for buying hybrids e.g. we will see more BMW 750i , rather than 730d or 7-series hybrids... or more LS460 than LS600h... That is completely understandable because government made this to increase tax revenue, not to fight global warming. It is clear by the fact that the cars which pollutes the most, but cost less than £40k will benefit most, and the ones which pollutes least will pay more, especially if it happens to be as well over £40k.. even for cheap cars the increase will be 500-900%. It will simply be not beneficial to buy fuel efficient car if it is over £40k as well.

rayaans · May 4, 2016

Im pretty sure the new 2017 VED is going towards roads now though!

Linas.P · May 4, 2016

1 minute ago, rayaans said:

Im pretty sure the new 2017 VED is going towards roads now though!

Not directly linked. Mr. Osborne "ring fenced" £10bn. Just to understand the figure - last year they allocated £10.8bn... (spend something around 12.3bn in the end) so that means they ring fenced less than they actually spending anyway - that said, £10bn is the lower limit not upper limit.. and what it means road expenditure should not go down by much and might actually stay the same or even increase. Still... they won't be spending anything near ~40-ish bn they are collecting.

Secondly, as explained previously .. this expenditure is combined and large part of it will not benefit actual VED payers (more likely opposite). Finally, even what is going to be spent directly on the roads is not necessary going to improve things. Good example would be - does SMART motorway benefits us? - no it doesn't... it just slows us down and effectively takes longer to reach destination, but the congestion is "smoother".. What would be beneficial - more lanes, wider roads, higher speed limits ... but that won't happen.