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Got a car? How the Budget affects you

Anyone who drives is always keen to find out if the cost of motoring is going to go up or down. Well, yesterday’s Summer Budget was a mixed bag.

Everyone will be affected by changes to car insurance, but the bigger costs won’t come in for a few years, and then they will only affect new car owners.

Here’s what you need to know.

Fuel duty will stay the same

Good news here as the tax drivers pay on petrol and diesel is frozen.

Of course, that doesn’t mean prices can’t go up – or down - as that depends on the price of oil.

Extra on car insurance

One of the smaller announcements in yesterday’s Summer Budget was the increase of IPT – Insurance Premium Tax – from 6% to 9.5%.

This will have an effect on cover for your car, as well as your home and most other insurance policies.

Despite falling premiums over the last few years, the increase in the tax from November this year will see the average car insurance policy cost an extra £17.50 (based on the average premium on the AA British Insurance Premium Index).

Young drivers face an even larger increase, with the average premium set to be £1,247, an additional £40.

New tax bands for new cars

Your existing car won’t be affected, but if you buy a brand new motor after April 2017, it’ll be taxed in a different way.

In the first year Vehicle Excise Duty (VED) will still be based on the carbon dioxide (CO2) emissions, with lower charges for the most efficient cars.

However, a standard annual rate of £140 will come in from the second year onwards.  

Only cars which emit zero grams of CO2 per kilometre will avoid the new standard rate and be truly tax-free.

Any car you buy costing over £40,000 will come with a £310 surcharge per year for years two through to six.

 

VED rates for new cars registered from 1 April 2017:

CO2 emissions (g/km) First year rate Standard rate
0 £0 £0
1-50 £10 £140
51-75 £25 £140
76-90 £100 £140
91-100 £120 £140
101-110 £140 £140
110 -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

 

First MOTs to be delayed

New car owners will have an extra year before they have to give their vehicle a once over. MOTs will be required after the first four years rather than three, though this is subject to a public consultation.

Roads could be improved

The new VED system will bring about one other change too. The Chancellor announced all the money raised in England will go into a Road Fund with the purpose of improving England’s highways, byways and more. However this won’t start until 2020.

What do you think?

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  • Philip Hall / 20 April 2016

    Why not simply put the road tax on fuel,the benefits ! .
    1 no admin centers.
    2 every one pays.
    3 those who use the road most pay the most ,the same applies to big limos next to a small car.

  • Philip Hall / 20 April 2016

    Why not simply put the road tax on fuel,the benefits ! .
    1 no admin centers.
    2 every one pays.
    3 those who use the road most pay the most ,the same applies to big limos next a small car.

  • Denise / 26 July 2015

    It seems odd that there is not a low medium and high road tax graduated increase of road tax according to how little / much your car pollutes instead of a one size fits all attitude for standard rate of road tax...

  • Katie / 9 July 2015

    A new car can cover a lot of miles in the first four years, particularly company cars. Is it safe to let them clock over 100,000 miles potentially in some cases, without them being checked?!