Car tax changes 2020: What updates are coming into effect? How will new rules affect me?

Those with an electric car are set for further tax breaks which will remove all car tax charges for owners of zero-emissions vehicles. However, costs are set to rise for other vehicle owners as the government attempts to push drivers to take up electric vehicles. 

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Are car tax rates changing for petrol and diesel cars? 

The chancellor’s budget confirmed car tax rates for non-electric vehicles will be increasing under the new updates. 

VED costs will increase from 1 April although heavy goods vehicles will be exempt from rises to support the sector. 

The budget statement says: “The government will uprate VED rates for cars, vans and motorcycles in line with RPI from 1 April 2020.”

Vehicle emissions will be calculated using the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) for the first time in 2020.

The service offers a more realistic reflection of overall emissions levels which could push your vehicle up into a higher tax band. 

Consumer experts Which? Say the changes could increase your overall car tax costs by between £20 and £35. 

The budget also says the government is publishing a call for evidence to assess how VED can be used to reduce overall emissions. 

This could suggest further car tax hikes could be on the way for motorists of the most polluting vehicles. 

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How much car tax do electric car owners need to pay?

The 2020 car tax changes are aimed at encouraging increased use of electric cars and owners of models will enjoy various breaks under the new legislation. 

From 1 April an added charge paid by owners of expensive electric cars will be removed meaning there will be no car tax fees whatsoever for electric car owners. 

This final £320 charge was only paid if your vehicle was valued at over £50,000 but this has now been axed. 

The budget said: “From 1 April 2020, the government will exempt all ZEVs registered until 31 March 2025 from the VED ‘expensive car’ supplement. 

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“The measure will incentivise the uptake of ZEVs to support the phasing out of petrol and diesel vehicles.”

Fiona Howarth, CEO of Octopus Electric Vehicles has praised the new changes which she claims cements the government’s support for electric vehicles. 

Speaking to Express.co.uk, she said: “In this year’s budget, the government cemented their support for electric vehicles, with incentives and benefits in place until 2025. 

“It’s a crucial step as we move towards what could be a 2032 ban on purchasing new petrol and diesel vehicles.

What are the changes for company cars? 

To further increase sales of fully-electric cars the government has decided to completely scrap benefit-in-kind rates for company cars. 

The updates mean car tax paid by business people through a salary sacrifice scheme will fall from 16 percent to zero. 

These changes will see costs axed for popular road cars such as the Tesla Model 3 and Renaultt ZOE if this is purchased on finance deals. 

Benefit-in-kind changes are predicted to cause an upsurge in company cars and boost electric vehicles in the UK. 

What has happened to the electric plug-in grant? 

The electric car plug-in grant remains but at a slightly lower price than from previous years and with a price cap introduced. 

Plug-in grants will now offer motorists just £3,000 towards the price of a new fully-electric car and road users will be unable to claim the money off the car is above £50,000. 

However Transport Secretary Grant Shapps has previously warned the grant would not be around forever as he urged motorists to snap up the deal.

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