How to beat the budget car tax increase
Buyers visiting swanky car showrooms after 2010 will face a stark choice. Buy the sleek petrol model and you'll pay £550 to tax it for the first year. Opt for the same car but with a smaller diesel engine, and you'll drive away having paid absolutely nothing in car tax.
Welcome to the new world of car taxation outlined in this week's budget.
The worst polluters will pay £950 car tax in their first year. But as research by Guardian Money shows, it is possible to buy a 4x4 or a people carrier and avoid paying much in the way of car tax by carefully choosing the model. The first questions a buyer of any car - new or used - should ask are, how much carbon dioxide does it emit, and which tax band is it in?
Such questions will be essential after the chancellor Alistair Darling this week ripped up the old car tax system.
Out goes the old regime that gently pushed car buyers towards the least polluting cars. Now we have a structure that actively demands you buy an environmentally friendly car - one that doesn't spew out huge quantities of carbon dioxide. Surprisingly this can include 4x4s. The Jeep Patriot 2.0 diesel, above, emits 180g of CO2/km and will, from next year, cost substantially less to tax than many family estates.
Although the headline-grabbing changes don't come into force for another two years, anyone thinking of buying a car soon needs to factor in these changes right now.
In the short term, the big losers are those driving large petrol-engined cars. Over the next two years they will see their annual road tax bill climb by between £100 and £200.
However, the real shock will come in 2010, when new car buyers face the so-called showroom tax - a higher road tax in the first year that reflects the car's CO2 emissions.
Cars that emit more than 255g of carbon dioxide per kilometre, such as the Ranger Rover Sport and any Ferrari, will come with an £950 bill for the first year's tax - a significant sum, although short of the £2,000-£5,000 demanded by environmental groups.
At the other end of the spectrum, anyone buying a brand new car in 2010 that emits
less than 165g of CO2/km will get the first year's car tax for free.
This group includes most small- and mid-sized cars, and also what many would consider some quite serious cars. The BMW 3 series 2.0 litre diesel car, emits just 128g/km, and after the first year the road-tax bill will be just £35 a year.
Compare that to the same model, a 3-series with a sporty 3.5 litre petrol engine, and the bills are quite different. In the first year the buyer will pay £550, and £310 a year from then.
These anomalies will apply across all the manufacturers' ranges of cars. In short, the new regime favours those who are happy to downsize or switch to diesel.
Take the Toyota Avensis estate. By 2010 a petrol 1.8 will cost £210 a year to tax, while the slightly larger diesel (2.0 litre) will cost £125 a year because it emits less C02. In comparison, the tiny Citroen C1 and the like will cost just £20 to tax, from March 2009 onwards
If you are buying a used car now, you need to look closely at what you'll be paying to tax your chosen model in the future.
Large petrol, automatic MPVs, such as the Volkswagen Sharan, will cost £455 a year to tax from 2009 - rendering them unattractive to potential buyers.
Darling's move has effectively wiped hundreds of pounds off the used value of such cars in a stroke.
Meanwhile, anyone who owns a car that was registered before March 1 2001 will continue to pay according to engine size. They will pay £120 a year if their car's engine is smaller than 1,549cc. Older cars with bigger engines will pay £185 over the next 12 months, and £200 a year for 2009/10.
To work out what you'll be paying to tax your car in the future go to SMMT.co.uk (click on to data services, then CO2, and lastly "search"). Key in your car details, and it will tell you how much Co2 g/km it emits. Then read across this table to work out what you'll pay. The table, which only affects cars registered after March 2001, shows what you pay this year, and after 2009 when the new banding regime come into effect.Source: www.theguardian.com