Vehicle Tax - Milking The Cash Cow

The cost of vehicle excise duty (tax) as on 13th March 2008 has undergone a major reorganisation. Vehicles (cars, motorcycles, light goods vehicles and trade licences) registered

before 1st March 2001:

Engine size

Up to 1549(cc) £120 (12 months) £66 (6 months)
Over 1549(cc) £185 (12 months) £101.75 (6 months)

after 1st March 2001

Band (CO2 g/km)

A: Upto 100 Not Applicable Not Applicable
B: 101-120 £35 (12 months) Not Applicable
C: 121-150 £120 (12 months) £66.00 (6 months)
D: 151-165 £145 (12 months) £79.75 (6 months)
E: 166-185 £170 (12 months) £93.50 (6 months)
F: Over 186 £210 (12 months) £115.50 (6 months) - reg before 23.03.06
G: Over 226 £400 (12 months) £220 (6 months) - reg on/after 23.03.06

The difference between 6 months' road tax and 12 months' tax is always an extra 20%. If this was reduced to 5-10% (administration charge) then more people would probably be able to 'stump up the readies' and stay legal rather than contribute nothing and be a criminal. As everything is costing more and more, then sensibly road tax cuts deeply into household budgets. But the government is greedy and this simply wouldn't do even though in a year nothing is lost and much is to be gained. But rocket science was never in the chancellor's lexicon.

Overall motorists will pay an estimated £1.2bn in extra road tax between April 2009 and March 2011. And a "showroom tax" will be up to £950. The deferred increase of 2p/litre until October 2008 (from 1st April) presumably excludes duty and VAT. Fuel duty will rise by ONLY 0.5p/litre in 2010, the lowest increase in three years. But add VAT and this will round-up to ONLY 0.6p or 3p/gallon. This equates to a yield of an extra 12p/gallon. Or for the average 'fill' of just 10 gallons: ONLY 120p. This, of course, is before the inevitable oil price hikes.

Also announced was the concept of road pricing (distance tax): funding for trials next year to examine how charging by the mile would change drivers' behaviour. Charging will happen, the issue is simply how to maximise the yield. It is suggested that 'road pricing could replace fuel duty eventually. Car tax will remain. It's still a case of how the 'in-your-face' back door stealth taxes are introduced: aka creative government. To increase the tax yield, an additional six new bands are introduced to the original seven taking the total up to 13: from A to M.

According to the Chancellor (Alistair Darling) the majority of motorists would pay less road tax or be no worse off even though rates will rise by up to £90 for many medium-sized family cars. What constitutes a medium-sized family car: between Band B and Band M. The official figures are confused and very misleading. The new rates of Vehicle Excise Duty (VED) are from Bands A to M. However, Band D is between 151-165 (g/km), yet the band limit jumps from 161-170 (g/km). There is no 165 (g/km) band end-point. The same for Band E: 166-185 (g/km). No end-point for 185 (g/km). It jumps over FROM 181 to 200 and directly INTO Band F.

Examination of the 2010-11 first year rate duty (new car) and 2010 -11 standard rate duty (continued taxation) demonstrates the "showroom tax":

(g/km) 2010-11 (new)

To 100 £0 (thereafter £0): new car - no road tax (first year only)
101-110 £0 (thereafter £20): new car - no road tax (first year only)
111-120 £0 (thereafter £35): new car - no road tax (first year only)
121-130 £0 (thereafter £95): new car - no road tax (first year only)
131-140 £115 (thereafter £115): "showroom tax" = £0
141-150 £125 (thereafter £125): "showroom tax" = £0
151-160 £155 (thereafter £155): "showroom tax" = £0
161-170 £250 (thereafter £180): "showroom tax" = £70
171-180 £300 (thereafter £210): "showroom tax" = £90
181-200 £425 (thereafter £270): "showroom tax" = £155
201-225 £550 (thereafter £310): "showroom tax" = £240
226-255 £750 (thereafter £430): "showroom tax" = £320
Over 255 £950 (thereafter £455): "showroom tax" = £495

Up to 130 g/km attracts no road tax with a new vehicle, but thereafter the higher rates become effective. The range 131-160 g/km has no showroom tax, but the new Band rates apply.

So, to encourage debt, it could be seen as saving money by getting a car a year before the new rates come into force. But, of course, a budget will happen before 2010 in 2009. Notably, the government department (DVLA) can easily 'remind' the registered owner when the tax is due and check that insurance cover is in place before renewing on-line payments, but cannot issue a windscreen notification disc that the car is insured for the registered owner (the applicant). The law, if necessary, must be enhanced to force the car to be insured before it is used on the road, but the very menacing TV licence (outsourced) 'advertising' cannot be replicated to cover cars.

One of the most galling moves is the imposition of a higher tax in 2008 on a car purchased before 2001 in a dreadfully (but typical) retrospective move.


One of the most galling moves is to