New car tax changes: Hundreds of petrol and diesel owners to pay £10 more every year

Martin Lewis gives money-saving advice on VED car tax

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Cars costing more than £40,000 must pay an extra “expensive” car tax, which has increased from April. The extra supplement used to see drivers pay an extra £325 per year but this has now risen to £335.

The charges will apply for a period of five years from when the car was first registered.

Tax checks are taken from the vehicle list price – the cost before any discounts were applied.

This means owners who paid just under £30,000 for their car may still be liable for charges if an offer was applied.

Tax updates mean owners of relatively new petrol and diesel cars will now pay £490 per year on tax charges once the standard and additional rates have been added together.

According to GOV.UK, alternative fuelled cars pay a slightly lower total fee of £480 per year.

The additional fee means owners who choose to purchase a relatively new car could pay up to £1,675 more in tax than those with older vehicles.

Zero-emissions vehicles which cost over £40,000 used to pay the additional charge but this has been scrapped in a bid to boost take-up.

Only fully electric models do not pay charges meaning plug-in hybrid owners are not exempt.

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Consumer watchdog Which? Confirmed electric cars “no longer have to pay” the charge under changes announced last year.

Which? said: “After the first year, owners of cars that cost more than £40,000 have to pay an additional annual supplement of £335 for five years – adding up to £1,675 in total.

“This £40,000 rule initially applied to all cars, including zero-emission cars that otherwise paid no car tax.

“So if you bought a brand new Tesla Model X (an electric car that costs from £75,000), for instance, you used to have to pay this supplement during the second to sixth year of ownership.

“However, it was announced in the 2020 Budget that zero-emission cars bought before 31 March 2025 would no longer have to pay that supplementary rate.

“Unusually, this exemption from the supplement also applies to existing owners.”

GOV.UK also confirmed the charge had increased by stating rates would be £335 per year for owners,

They said: “You have to pay an extra £335 a year if you have a car or motorhome with a ‘list price’ (the published price before any discounts) of more than £40,000.

“You do not have to pay this if you have a zero-emission vehicle.

“You only have to pay this rate for five years (from the second time the vehicle is taxed).”

The changes are just one of several updates to the tax system introduced this April.

Vehicle Excise Duty (VED) rates have increased across the board with owners of highly polluting models seeing the largest increases.

Owners of electric cars purchased under salary sacrifice schemes have also been affected by an increase in benefit in kind rates.

These charges were dropped from 16 percent to zero last year but have increased to one percent from April 2021.

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