Dear Alex,
In Andrew English’s recent review of the new Lamborghini Revuelto, I saw that its VED (vehicle excise duty/road tax) drops to £190 at year six. As the owner of a 2016 Mercedes E63 Estate, why does the road tax on new cars drop so low? (By contrast, I spend more than £600 on VED each year.) This has the potential to take a lot of old cars off the road, which I appreciate is the aim – but is my E63 V8 any worse than the V12 Lambo?
–DN
Dear DN,
It’s all to do with the tax changes introduced on April 1 2017. On that date, we changed from a tax system based purely on CO2 to one that switches to a flat rate from year two onwards, with a five-year surcharge for cars with a list price of more than £40,000.
This was one of the more baffling changes made to our tax system in recent years, penalising cars that are pricier (and, given that the £40,000 “luxury tax” threshold hasn’t been changed since, resulting in a stealth annual tax increase as a result of fiscal drag), without much reference to the effect they have either on the environment or on the level of damage they do to the roads.
It has led to all sorts of anomalies between models that cross the threshold. In your case, if you had bought an E63 registered after April 2017, you too would pay only £190 a year in tax by now.
But your car is still taxed according to the old system, under which its hefty CO2 output will land you with an annual tax bill of (sorry to be the bearer of bad news) £710.
By contrast, under the new system, the Lamborghini Revuelto buyer will pay £2,745 in the first year (based on its CO2 output), then £590 for the following five years, then £190 every year thereafter – despite the fact its official CO2 emissions figure of 276g/km is higher (and this figure should be taken with a pinch of salt, given the Revuelto is a plug-in hybrid, and therefore favoured by the current emissions tests).
It also works the other way around. Owning a car that produces little CO2 and was registered in 2016 will usually cost significantly less in VED than the same car registered after April 1 2017. Something for everyone to bear in mind if they’re in the market for a car registered around this time.
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