If you’re planning on upgrading your fleet after the 31st March 2017, beware. The road fund license is back, and how. Chancellor Osborne was swift on the detail when he announced the return of the tax, but its implications are far-reaching.
The reform to Vehicle Excise Duty will take effect on cars registered after 1st April 2017, with all but all-electric vehicles exempt. For all other cars, expect to pay £140/year for the privilege of driving new wheels. If the list price of your chosen vehicle exceeds £40,000, you’ll not only pay the £140 smackers, but an (un)pleasant £310 supplement, to boot.
The amount you’ll pay is based on your emission levels; on the face of it, that sounds like a positive move towards promoting green energy. But here’s the rub.
Current vehicle excise duty only comes into effect if your engine emits 100gm of Carbon Monoxide per every kilometer you drive. This is Band A under current regulation and many new cars, hybrids especially, fall beneath this limit.
The new ruling sees the threshold of exemption plummet to only 1kg of CO2 per km. This means only all-electric vehicles will escape VED.
The full extent of the tax, such as it is, you can find on the government’s dedicated Vehicle Excise Duty web page.
What’s brought about the return of the tax?
Less and less cars coming off the production line emit high volumes of CO2. As a consequence, fewer vehicles qualify for Vehicle Excise Duty. As it stands, many motorists driving new vehicles don’t pay any duty at all.
Then there’s the price of petrol at the pump. It’s down, forecast to come down further and the government froze rises in fuel duty to aid economic recovery. The Chancellor, if he stays on track, has promised to deliver £20bn in savings during this Conservative reign.
The dual effect of less Treasury income from both VED and at the pump has forced the Chancellor’s hand.
Many people across all industry sectors are questioning the Chancellor’s maths already. To prevent further potential tax income slip through the government’s fingers, the Chancellor has pulled an ace – the Road Fund License – from up his sleeve.
Fleet managers face difficult choices
The move is going to be difficult for fleet managers to digest if they want to help the UK reach the EU emission limit by 2020, as we must.
Vehicle manufacturers are doing their bit. But with electric fuel still not recognised in the advisory fuel rate and now the exclusion of hybrid motors from VED exemption, it’s difficult to see budget-conscious fleet managers accommodating green initiatives.