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Explained: diesels hit hardest in 2018 VED car tax rises

  • Increased VED road tax rates from 1 April 2018
  • Diesels now cost more to tax than petrol-engined cars
  • Zero-emission cars costing less than £40k remain exempt
  • Increased VED road tax rates from 1 April 2018
  • Diesels now cost more to tax than petrol-engined cars
  • Zero-emission cars costing less than £40k remain exempt

Inflation-based increases have come into force for all first-year VED car tax bands from 1 April 2018, although buyers of new diesel cars after that date have been hit harder than customers opting for a petrol-engined model.

As with the revised Vehicle Excise Duty (VED) system introduced in April 2017, these changes only affect the first year’s tax, which is based on CO2 emissions.

Owners of most cars will continue to pay an unaltered flat rate of £140 from year two onwards. Only zero-emission cars costing less than £40,000 remain exempt from VED car tax charges.

VED car tax increases for 2018: how diesels are hit

With the Treasury citing the necessity of inflation-linked rises for first-year VED tax bands for new cars, nobody registering a petrol- or diesel-engined car from April 2018 will escape the increased costs.

However, while those cost increases are modest for petrol cars, buyers of new diesels will have to fork-out significantly more.

Ford Fiesta hatchback side dynamic

For example, opt for an economical small diesel hatchback, such as a five-door Ford Fiesta Zetec 1.5 TDCi producing 84g/km of CO2, and you’ll pay £125 for the first year’s VED from 1 April 2018, compared with £100 if it was registered before that date. That’s the same cost as a more powerful – and more polluting – 1.0-litre EcoBoost Fiesta that sits one tax band higher.

Volkswagen Golf GTD hatchback front dyanamic

Similarly, the ever-popular Volkswagen Golf GTD diesel hatchback emitting 125g/km of CO2 also sees a chunky increase: before 1 April 2018 the first year’s VED would have set its owner back £160, but now it’s £205. A racier petrol-engined GTI will cost the same, despite being in the tax band above courtesy of its 148g/km of CO2 output.

Range Rover Evoque SUV side static

How about a powerful SD4 diesel-engined Range Rover Evoque producing 153g/km of CO2? Pre-April 2018’s increases the year-one VED rate was £500, but now, at £830, it could be enough to persuade some into a petrol-fuelled Si4 instead. Despite producing more CO2 (165g/km), the petrol Evoque only costs £515 for the same period.

Clearly the government is keen for people to make the switch away from diesel to petrol. 

A full breakdown of the first year VED car tax rates is shown below.

CO2 emissions (g/km) Year 1 VED rates (petrol and diesel cars) registered before 1 April 2018 Year 1 VED rates (petrol cars only) registered after 1 April 2018 Year 1 VED rates (diesel cars only) registered after 1 April 2018
< 50 £10 £10 £25
51-75 £25 £25 £105
76-90 £100 £105 £125
91-100 £120 £125 £145
101-110 £140 £145 £165
111-130 £160 £165 £205
131-150 £200 £205 £515
151-170 £500 £515 £830
171-190 £800 £830 £1,240
191-225 £1,200 £1,240 £1,760
226-255 £1,700 £1,760 £2,070
> 255 £2,000 £2,070 £2,070

New cars’ environmental credentials are also made clear on updated versions of the government’s labelling system.

2018 VED car tax label

Will new car buyers notice much of a difference?

Given that around three-quarters of all new car purchases are made using some kind of finance agreement, such as a PCP, where the first year’s VED tariff is incorporated into the monthly cost, it might well be that buyers of low-polluting diesels won't notice much of an increase.

However, on models such as the Evoque, where the increase would represent an extra £10-per month on a three-year finance contract, if a customer isn’t persuaded to turn to petrol, it might make them reconsider the optional extras they had intended to include.

Do any diesels escape the 2018 VED car tax increase?

Yes, there is some good news: if a diesel car meets the forthcoming Real Driving Emissions Stage 2 (RDE2) levels set to come into force in January 2021, it is exempt from the VED surcharge and will cost the same as a petrol model.

But all isn’t rosy: at the time of writing, no car manufacturer offers a diesel-engined car that complies with RED2, so that’s a bit of a red herring for the time being.

Cars costing over £40,000 still attract additional VED car tax

As a form of ‘fair contribution’ to the VED system, buyers of more expensive cars continue to be hit with an additional £310 car tax surcharge on top of the standard rate between years two and six. This applies to vehicles costing over £40,000 new regardless of their CO2 emissions.

Tesla Model S front static

This means a zero-emission electric Tesla Model S costs an extra £310 annually between years two and six, totalling £1,550.

Any similarly priced car producing 1g/km of CO2 or more will cost an additional £2,250 over the same period of time, so there is still a saving to be had for going electric.

Classic car tax exemption

Vehicles built 40 years before 1 January of each calendar year will automatically be exempt from paying VED car tax.

That means that as of 1 April 2017, any car built before 31 December 1977, won't need to pay any tax. Note that this isn’t an automatic process and the exemption needs to be applied for.

To renew your car tax online click here

Picture credit: Getty

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