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Car tax disc

The £100 million question: why is car tax evasion rocketing?

Car tax discThe government told us eliminating the paper tax disc would save the country £10 million a year: hurrah! What a pity latest stats from the Department for Transport reveal a potential revenue loss of £107 million per year caused by tax evasion. Drat!

That £107 million figure is easily the greatest amount lost to tax evasion in at least a decade.

The scale of the problem is enormous: in 2013, 0.6 percent of vehicles on British roads were observed to have evaded paying Vehicle Excise Duty (VED). That grew to 1.4 percent in 2015. In 2017, that figure’s grown further, to 1.8 percent. Which is equal to around 750,000 vehicles.

Even the DfT seems surprised by the increase: It observes “the number of vehicles evading is significantly higher in comparison to 2015”. Compared to 2013, it fails to add, it’s even more significantly higher.

A potential loss of £0.1 billion a year because of 750,000 people not paying their road tax is a serious issue in anyone’s book. Now, the DfT does add that it can’t say for sure whether £107 million is the actual loss, because some of that revenue may have been recovered through DVLA enforcement, or through guilty owners paying up later.

But it’s still not small change. And it’s still tripled since the paperless car tax system was introduced in October 2014. Question is, why are the rates rocketing? The paperless system is undoubtedly the cause, but what aspect of the system is causing so many tens of millions to be lost?

Paperless car tax evasion: the causes

Forgetfulness

Fifty-two percent of the unlicensed vehicles caught had been without road tax (VED) for less than two months. The next highest figure is two-to-four months, way back on less than 20 percent.

This indicates that the power of the visual reminder on a car windscreen was significant – probably much more so than DfT officials expected. Eventually, people will be alerted that they’re driving around in an untaxed car – perhaps at MOT or car insurance renewal time – but it seems the initial forgetfulness factor is high.

Reminder letters are sent out when VED tax is due, but it seems these aren’t enough to chivvy people into sorting their car tax promptly. Maybe they’re sent out too early, duly filed and themselves forgotten about…

Not understanding the change of owner rules

Under the new rules, car tax is not transferred to the new owner when a car is sold. The original owner instead receives a refund, meaning the car automatically becomes untaxed when the DVLA receives the paperwork.

Some motorists don’t realise this – 15 percent of the 750,000 vehicles caught were spotted after a licence refund had been issued, and no subsequent licence had been taken out. However, this pales compared to the 70 percent of cars simply driving around after the tax had expired – and the fact this 15 percent figure is almost half what it was in 2015 suggests motorists are becoming familiar with the new system. It’s not the root cause of why there are now so many untaxed cars on our roads.

Direct Debit foibles

Motorists can now pay for road tax via Direct Debit: 13 million were taken out in 2016/17. Could tech problems with the system be causing evasion rates to go up? It seems not: the DVLA says it “actively pursues” any lapsed payments – and the fact that so many millions of organised people are signing up to have their VED paid automatically should theoretically mean the evasion rate ought to stabilise or even go down, rather than skyrocket…

Budget-crunched motorists

Fifty-one percent of unlicensed cars caught were aged 10 years or more. In contrast, 24 percent of licenced vehicles were aged 10 years or more. Maybe older, cheaper cars are being driven by those with less disposable income? And maybe cash-stricken motorists are thus being unavoidably forced into taking a chance that they won’t be caught?

Car tax is not cheap: the cost for a vehicle built between 2001 and 2017, emitting 226g/km CO2 or more, is over £500. Given the real terms fall in wages, that’s an enormous sum for those just about managing.

Oh, and what about motorcycles?

If you think tax evasion is bad for cars, just look at bikes: 5.8 percent of motorcycles are reckoned to be evading VED. Admittedly, says the DfT, it’s harder to collect tax for bikes than it is for other vehicles, but it’s still a fair indication of a higher evasion rate for motorcycles.

Eleven percent of all unlicensed vehicles had been so for more than a year. Look to motorcycles, and that figures rockets to 38 percent…

In a sense, it’s perhaps inevitable: if the policing system for VED evasion partly relies on ANPR, the fact bikes have half the number of registration plates as cars means they are, in theory, half as likely to be caught by police cameras.

So what’s the answer?

The treasury will be keen to solve this dilemma, particularly as the amount lost due to licence evasion has gone up so dramatically. The answer, it seems, is simply a better reminder system.

Motoring Research has one idea that might work: a brightly-coloured piece of paper on the windscreen telling everyone who looked at it if the vehicle was licenced or not, instantly, at a glance. Even if the car’s owner forgot, their partner, or kids, or neighbours might spot it. It would be very obvious indeed if you’d evaded road tax – and who wants the embarrassment of displaying to the world that they’re a tax-dodger?

We estimate it could only cost £10 million a year to enact, a mere fraction of the amounts being lost to road tax evasion. It’s such a strong idea, we’ll certainly be sending it on to the DfT. We’ll let you know how we get on.

>NEXT: The smart motorways most likely to hit you with a ticket

Revealed: the cars hit hardest by new tax rules

Revealed: the cars hit hardest by new tax rules

Research by What Car? has revealed that the cost of taxing a new car after 1 April 2017 could be up to 25 times more expensive, with even environmentally-friendly plug-in hybrids facing stiff penalties. Vehicle tax for the first year is based on CO2 emissions, but after that the rate depends on the type of vehicle.

From year two it’ll cost £140 for a petrol or diesel car, £130 for an alternative fuel vehicle and £0 for vehicles with zero CO2 emissions. Crucially, all cars with a list price of more than £40,000 will be subject to an £310 surcharge for five years from year two. Read on to discover the top 10 tax increases. Buy now or pay later…

10. Lexus GS 300h 2.5 F-Sport 4dr CVT: £990 increase

Register a Lexus GS 300h before the end of March and you’ll pay just £40 in tax over the first three years. Under the new Vehicle Excise Duty (VED) rates, that figure increases to £1,030, an astonishing 2,475% change over three years.

9. Lexus RX 450h 3.5 SE 5dr CVT Auto: £990 increase

As What Car? is keen to point out, conventional hybrids such as the Lexus GS 300h and RX 450h will be hardest hit, meaning luxury cars with low emissions will be less attractive than before. It’s another 2,475% change for this luxury SUV.

8. Lexus RC 300h 2.5 F-Sport 2dr CVT Auto: £990 increase

8. Lexus RC 300h 2.5 F-Sport 2dr CVT Auto: £990 increase

The three-year cost of £1,030 is made up of a £150 first-year tax rate based on its emissions, followed by two subsequent payments of the new hybrid flat rate of £130. Further misery comes in the form of the £310 a year charge for cars costing more than £40,000, payable between years two and six.

7. Mercedes-Benz C220d AMG Line 2dr: £1,000 increase

There’s worse news if you’re thinking of buying a Mercedes-Benz C220d Convertible in April, with the AMG Line model subject to a £1,000 increase in tax. Buy now and pay £60. Buy in April and pay £1,060, which represents a 1,667% hike.

6. Audi A5 2.0 TDI Sport 2dr S tronic: £1,000 increase

What Car? editor, Steve Huntingford, said: “The new tax laws are designed to increase the advantage of running a zero emissions car, but they make things much more complicated and push up the prices of many ‘bread and butter’ models.”

5. Mercedes-Benz E200d AMG Line Premium 4dr 9G-Tronic: £1,000 increase

5. Mercedes-Benz E200d AMG Line Premium 4dr 9G-Tronic: £1,000 increase

The new VED rates apply to all new cars registered on or after the 1 April 2017, but do not affect old cars or new cars registered before or on the 31 April 2017. Be quick and you can escape the increase.

4. Mercedes-Benz C250d AMG Line Premium Plus 4dr 9G-Tronic: £1,000 increase

The £310 surcharge for cars costing more than £40,000 will affect drivers of even the most fuel efficient vehicles. Take the Tesla Model S, for example, which, while free to tax in year one, will cost £310 a year between years two and six.

3. Audi A6 3.0 TDI S Line 4dr S tronic: £1,000 increase

The Audi A6 3.0 TDI with the S tronic transmission will jump from £60 to £1,060, a percentage change of 1,667%. Head down to your Audi dealer before the end of the month to escape the hike.

2. Mercedes-Benz C250d AMG Line Premium 2dr Auto: £1,000 increase

2. Mercedes-Benz C250d AMG Line Premium 2dr Auto: £1,000 increase

Under the current scheme, all cars with sub 130g/km CO2 emissions are exempt from VED in the first year, with sub 100g/km cars free of tax from year two. From 1 April, only cars with zero emissions are tax exempt. This is why luxury cars with low emissions are the hardest hit.

1. Mercedes-Benz S300h L AMG Line 4dr Auto: £1,000 increase

Your typical Mercedes-Benz S-Class owner is unlikely to be too bothered about VED costing 25 time more than before, but £1,000 remains a chunky wedge of cash to find over three years.

Which hybrid cars will cost more to tax?

Which hybrid cars will cost more to tax?

The £310 surcharge for vehicles costing more than £40,000 is going to hit buyers of luxury hybrid models in the wallet. On the flip-side, some vehicles will be eligible for a government grant of £2,500 if their CO2 emissions are less than 75g/km. What Car? has provided details of six popular hybrid and plug-in hybrid models.

Volvo XC90 T8 Hybrid Inscription 5dr Geartronic: £880 increase

Register a Volvo XC90 T8 before the end of March and you’ll pay nothing in VED. From April, you’ll pay £880 for the first three years. Our advice is simple: buy now.

Mitsubishi Outlander PHEV 4hs 5dr Auto: £880 increase

It’s a similar story for the Mitsubishi Outlander PHEV, which goes from zero to £880 overnight. Makes that £2,500 grant seem even more appealing.

Audi Q7 3.0 TDI Quattro e-tron 5dr Tip Auto: £880 increase

Audi Q7 3.0 TDI Quattro e-tron 5dr Tip Auto: £880 increase

Without wishing to sound like a broken record, it’s the same story for the Audi Q7 e-tron. Although the 48g/km Q7 is tax exempt in year one, it costs £130 from year two and is also subject to the £310 surcharge for cars costing more than £40,000.

Porsche Cayenne S E-Hybrid 5dr Tiptronic S: £895 increase

Thanks to CO2 emissions of 75g/km, the Porsche Cayenne S E-Hybrid is subject to a first year alternative fuel VED rate of £15, which makes it slightly more expensive than the Audi Q7 e-tron.

BMW X5 xDrive40e SE 5dr Auto: £970 increase

At 78g/km CO2, the BMW X5 xDrive40e is even less efficient than the previous two cars and slots into the fourth tier of the new VED tax bands. Alternative fuel cars emitting between 76 and 90g/km will pay £90 in year one.

Lexus RX 450h 3.5 SE 5dr CVT Auto: £990 increase

Lexus RX 450h 3.5 SE 5dr CVT Auto: £990 increase

It’s the Lexus RX 450h once again, and a reminder of that 2,475% increase in VED.

Britain’s best-sellers

Buyers of Britain’s most popular cars won’t escape a tax penalty, with six out of the top 10 best-selling vehicles set to incur eye-watering tax increases. As the What Car? analysis reveals certain derivatives of the top-sellers will command an extra tax bill of between £400 and £1,000 over three years.

Vauxhall Astra 1.0T ecoFLEX Design 5dr Easytronic: £400 increase

Register a Vauxhall Astra with a 1.0-litre turbocharged engine and Easytronic transmission before the end of March and you’ll pay no VED. From April, you’ll pay £400.

Ford Focus 1.5 TDCi 120 ST-Line Navigation 5dr Powershift: £400 increase

Ford Focus 1.5 TDCi 120 ST-Line Navigation 5dr Powershift: £400 increase

The same penalty applies to the Astra’s chief rival, the Ford Focus. From zero to £400 overnight.

Nissan Qashqai 1.5 dCi Acenta (Comfort/Tech Packs) 5dr: £400 increase

Britain’s most popular crossover will be slightly less attractive in April. Well, buyers will be £400 worse off.

Audi A3 1.6 TDI SE 5dr S tronic: £400 increase

And, the same is true of the Audi A3 1.6 TDI in SE trim and when fitted with the S tronic transmission.

BMW 340i M Sport 5dr Step Auto (Business Media): £845 increase

BMW 340i M Sport 5dr Step Auto (Business Media): £845 increase

Right now you’ll pay £555 to tax a BMW 340i M Sport for the first three years, but that figure rockets to £1,400 in April. That’s an increase of 152%.

Mercedes-Benz C350e Sport Premium 4dr Auto: £895 increase

And finally, the Mercedes-Benz C350e hybrid shoots from zero to £895. Remember, the new VED rates apply to vehicles registered on or after 1 April 2017, so there’s still time to beat the taxman. Just.

changes to road tax 2017

New 2017 road tax rules: a five-minute guide

changes to road tax 2017

From 1 April 2017, Vehicle Excise Duty – commonly known as road tax – is set for some major changes. If you’re looking to buy a new car in 2017, you really need to know about these and how they might affect you.

First things first – if you own a car registered before 1 April 2017, the changes don’t affect you. But if you’re in the market for something new, you have until the end of March 2017 if you don’t want to be stung by the reforms.

And that’s because, while there’s good news for some, the majority of drivers could be left out of pocket. Read on to find out more.

Why is the system changing?

Cast your mind back to the budget of summer 2015, when the Chancellor of the Exchequer announced an overhaul of the current system. According to then Chancellor, George Osborne, the changes are required to fill a hole in the Treasury’s coffers.

In simple terms, you’re buying too many super-efficient petrol and diesel cars, and with a taxation system based on CO2 emissions, the government has been left out of pocket. Indeed, Osborne claimed that, under the current system, 75% of new cars would be eligible for free road tax by 2017.

Something had to give.

What are the changes to road tax?

The rate of Vehicle Excise Duty (VED) will still be split into 13 bands and calculated on a vehicle’s CO2 emissions. Only cars with 0g/km CO2 emissions will be eligible for free road tax. This is a big deal.

Since March 2001, new cars emitting less than 130g/km CO2 have been tax exempt in the first year, and subject to a sliding scale of taxation for each year thereafter. For example, buy a car in band B (101-110g/km) and you’ll pay nothing in the first year and just £20 from year two.

From April 2017, the cost will rise considerably. Not only will you pay £140 in the first year, you’ll also pay £140 in the second year and each year thereafter. So at the end of year three you’ll have spent £420 on tax – £380 more than if you bought the same car a month earlier.

The first-year rate of tax is based on a sliding scale, ranging from free road tax for electric and hybrid vehicles, to £2,000 for cars with CO2 emissions in excess of 255g/km. From the second year, all but the zero emissions cars move to flat rate of £140.

This is potentially good news for buyers of the least efficient cars on sale. Take the Bentley Flying Spur with a V12 engine. With CO2 emissions of 335g/km, under the current system you’ll pay £1,120 in the first year and then a hefty £515 from the second year.

Using the new system you’ll have to find £2,000 for the first year, but the second year rate drops to the standard £140. Keep the car for a few years and you’ll be quids in. But there is a catch…

From April, all vehicles with a list price of over £40,000 – including zero emission cars – will attract an additional rate of £310, payable each year for five years from the end of the first vehicle licence. At this point it drops to the standard rate.

Which means a Tesla Model S will cost £310 a year – a big shock for those who might be expecting free road tax.

Is it worth buying a car before April?

If you’re in the market for an efficient petrol, diesel or hybrid vehicle, it’s almost certainly worth registering it before the end of March. Indeed, industry experts are expecting one of the busiest months on record, as buyers also rush to grab a car with a new 17-plate.

Say, for example, you buy a new Suzuki Celerio with a 1.0-litre engine emitting 99g/km CO2. Register the car before the end of March and you’ll pay no road tax whatsoever. From April, you’ll pay £120 in year one and then £140 from year two. Three years on and you’re £400 out of pocket.

The case isn’t quite as clear cut when it comes to the least efficient vehicles, and much will depend on how long you intend to keep the car. There’s also the penalty for £40,000 cars to take into consideration.

Oh, and don’t think you’ll be able to escape the £310 fee by negotiating the price down below £40,000. The government will use the published list price. Go easy on the options, too, as these could push your car beyond the £40k mark.

Do the changes affect my current car?

Tax rates for vehicles registered on or before 31 March 2017 will not be affected by the changes.

VED bands and rates for cars first registered on or after 1 April 2017

CO2 emissions (g/km)First year rateStandard rate*
0£0£0
1 – 50£10£140
51 – 75£25£140
76 – 90£100£140
91 – 100£120£140
101 – 110£140£140
111 – 130£160£140
131 – 150£200£140
151 – 170£500£140
171 – 190£800£140
191 – 225£1200£140
226 – 255£1700£140
Over 255£2000£140

*Cars with a list price of over £40,000 when new pay an additional rate of £310 per year on top of the standard rate, for five years.