FREE VED road tax for 2 in 3 new car buyers

BMW-i3Ever-improving CO2 emissions figures from new cars helped 1.4 million motorists pay NO road tax for the first year in 2013.

This, reveals the RAC Foundation, equals 63% of the 2.2 million new cars registered – suggesting that the government has been caught out by the sheer pace of emissions reductions by vehicle manufacturers.

First-year VED road tax is free for cars emitting up to 130g/km CO2. 1,396,000 new cars fell into this category last year, including a staggering 324,000 which emitted 100g/km CO2 or less.

In contrast, just 83,000 new cars registered emitted 201g/km CO2 or more (and thus pay at least £635 in first-year VED); as CO2 is directly linked to fuel consumption, it’s rapidly improving efficiency of Britain’s new car fleet is clear.

VED still free for many after year one…

VED rates after the first year do see charges imposed on cars emitting 101g/km CO2 or more, but they’re still only £20 or £30; only once CO2 rises above 121g/km CO2 is a three-figure £110 charge imposed.

Looking forward, even in the 2014-15 tax year, cars emitting up to 100g/km CO2 will enjoy completely free road tax. And it’s certain that even more than the 324,000 sold in 2013 will be purchased this year…

These tax-beating new cars do carry a warning, though: the government is losing tax income in two ways because of fast-improving new car efficiency – both in annual VED and in tax on fuel at the pumps. It’s very likely the government will tighten the CO2 bandings, meaning only ultra-low CO2 cars qualify for free road fund licence.

Revenue-savvy officials will catch up and respond to the fact 1.4 million new car buyers paid zero VED last year. How quickly they will catch up to the ever-improving new cars coming from car manufacturers is another matter. After all, there’s only so much you can add onto any tax without alienating voters…

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