Martin Lewis gives money-saving advice on VED car tax
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Anyone purchasing a car which costs more than £40,000 are issued an extra £335 Vehicle Excise Duty charge for five years. However, experts at Motorfinity have warned this ‘expensive car tax’ is calculated based on the car’s list price which could cause confusion.
This is the original price before discounts meaning things like added extras could see prices rise beyond the threshold.
However, Motorfinity warns prices had increased over the weeks where a car was still being built, leaving drivers forced to pay a charge they did not sign up for.
Any increases would be down to national inflation or standard price rises from the manufacturer.
This has left some confusion among buyers who are not sure at which point the car is taxed.
Daniel Briggs, CEO of Motorfinity, has claimed the Government needs to offer “more transparency and guidance” on tax charges to ensure drivers make “well-informed decisions”.
He said drivers did not have a “crystal ball” to determine whether values will eventually rise after a purchase has been made.
Speaking to Express.co.uk, he said: “I believe the Government should reconsider their policy, and instead base the value at the time of the order, not at the point of registration.
“People need to feel confident that when placing an order for a vehicle below £40,000, they will not be stung with the extra tax.
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“COVID-19 restrictions have led to longer lead times in factories, and consumers don’t have a crystal ball to confidently predict if their vehicle value price will change.
“I believe there needs to be much more transparency and guidance from the Government to ensure customers aren’t getting stung and have all the facts to make a well-informed decision about the car that’s right for them.
“Of course, cases of inflation are unavoidable but if customers have a clear understanding of how this tax is actually calculated by the Government, and how the additional extras which don’t, at first, seem like the ‘car price’ are all factored into the overall tax, it could make all the difference.”
GOV.UK confirmed drivers would have to pay an extra £335 per year if their car is valued at more than £40,000.
However, they said drivers would only need to pay this rate for a period of five years.
This would see some drivers forced to pay £1,675 in tax charges over the course of half a decade.
As of April 2020, fully electric models have been exempt from the extra £335 charge on models over £40,000.
It was announced in the 2020 Budget that zero-emission cars purchased before March 31, 2025 would no longer pay the extra fee.
This exemption from the charge also applies to existing owners meaning those who purchased electric models a couple of years ago will not face charges now.
The rule has been introduced as another way to incentivise the purchase of expensive electric cars as part of the transition to eco-friendly vehicles.
However, plug-in hybrids are not exempt from the rule meaning these buyers will still need to pay the costs.
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