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April 2020 road tax changes

Road tax, otherwise known as Vehicle Excise Duty or Road Fund Licence, is a yearly fee charged to all car owners. The amount due is dependent the vehicle’s CO2 emissions levels, as recorded when the vehicle was first registered. Simply put, the higher your vehicle’s CO2 emissions, the more your annual road tax bill will be.

Revisions to road tax fees and relating tax bandings are nothing new and there have been a number of significant changes made in recent years. Most recently these have equated to relief for drivers of electric or hybrid vehicles and, conversely, penalisations for diesel and other high polluting models.

The latest change, due on vehicles registered on or after April 2020, will further this divide. This is because the tax bandings for newly registered vehicles will be decided based on new WLTP figures as opposed to the NEDC method used previously.

Why will road tax fees change under WLTP testing?

WLTP (the Worldwide Harmonised Light Vehicle Test Procedure) has been introduced to replace the outdated NEDC test (New European Driving Cycle) for recording vehicle emissions levels. Where the NEDC test recorded a vehicle’s CO2 output based on artificial, laboratory-based environments, the WLTP has been designed specifically to be a more rigorous and realistic test. Consequentially, a more truthful (and therefore in most cases higher) CO2 figure will be produced for each vehicle. 

Although the actual CO2 output of a vehicle may not have changed, due to more accurate testing the CO2 output recorded for each vehicle is now likely to be higher. In some cases considerably so.

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What difference will the April 2020 road tax changes have?

From April, car tax fees will be calculated based on WLTP standards for the first time. This means that most cars will record higher emissions levels and as a result owners will be liable to pay more tax.

Until now, road tax costs have changed because the fees relating to the certain CO2 levels have be revised. Now it is the CO2 outputs recorded on each car that are changing.

What this means is that cars bought in April will be inseparable from a VED tax bill that could be £100s greater than the same car bought in March. For a full list of the new road tax rates see here: the Driver and Vehicle Licensing Agency.

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How do these changes affect Benefit in Kind (BiK)?

Alongside personal road tax rates, the tax paid on company cars (known as Benefit in Kind) has also changed to consider WLTP instead of NEDC values. BiK fees will therefore now follow in the same structure as personal road tax. 

However, the biggest change for company car drivers will be the incentive towards electric vehicles: electric cars will be charged at 0 percent benefit-in-kind from April onwards compared to the current 16 percent rate.

How will the tax changes affect your lease vehicle after April 2020?

The road tax changes introduced in April 2020 will affect all vehicles (whether bought, leased or alternatively funded). 

A vehicle lease, whether on personal or business contract hire, is the only funding option that includes the cost for road tax for the whole of the term. All quoted lease prices on vehicles due after April 2020 will therefore include the new tax rates applicable to that vehicle.

The vehicle tax changes coming into effect in April 2020 only affect vehicles registered after 1st April 2020. If you have already taken delivery of your new lease car or it has been pre-registered on the 69 plate, these changes will not affect you.