Car tax changes in April 2020: Everything you need to know

The minefield of car tax is set to become more complicated next month. While the process is remaining broadly the same, changes to the way tax rates are determined could drastically affect which tax band your new car sits in – meaning you could be stung with an even higher tax bill.

To make sure you’re up to speed with the new car tax system, carwow has made a guide on everything you need to know about the changes in April.

What changes are being made to car tax rates?

For the most part, the system will remain as it is now. The tax band your vehicle sits in will be decided by your car’s certified CO2 emissions – meaning the more polluting your car is, the higher your first-year tax bill.

What’s being changed, however, are the CO2 figures that will determine those tax rates. Currently, tax for new cars is based on the emissions from the old NEDC test cycle, which has been criticised for not being representative of real-world driving conditions. From 6th April 2020, however, figures from the more representative WLTP test cycle will be used to determine your new car’s tax.

What impact will these changes have?

Because cars are driven for longer and at higher speeds in WLTP tests than they were in the out-of-date NEDC tests, they tend to use more fuel and emit more CO2 than they did on the old cycle. As a result, buyers may see their first year tax rates rise if they purchase a new car next month.

Let’s use the Kia Ceed hatchback with the 1-litre petrol engine as an example. Depending on the spec, this car emitted between 115g/km and 126g/km of CO2 under the old NEDC cycle, which would have meant the car was liable for the £175 first year tax rate.

Under the newer WLTP test, however, the same car emits 128g/km to 136g/km. Therefore, when the NEDC-to-WLTP changeover takes place, this spec of Kia Ceed will be liable for a first year tax fee between £175 and £215.

This will also get a bit more complicated if you decide to buy a diesel car. If your car doesn’t adhere to the RDE2 standard over nitrogen oxide (NOx) emissions, it will be moved up to the next band up for its first year road tax rate, which means you will need to pay more tax than you would have done if you bought an RDE2-compliant car. You can find out from the car’s manufacturer if it meets the RDE2 limits or not.

Will anything change with taxing my car after the first year?

Because tax rates for cars after their first 12 months on the road aren’t calculated based on their CO2 emissions, the rates will remain as flat annual fees from that point onwards. For cars powered purely by petrol or diesel engines, this will be £150 per year, which falls to £140 per year for hybrids and “alternative fuel” new cars powered by bioethanol or liquid petroleum gas (LPG).

If your new car’s price exceeds £40,000, you will also need to pay an extra £325 for years two to six (i.e. the five years after your first year tax runs out). The only exceptions are all-electric and hydrogen fuel cell cars – as they don’t emit any CO2, they are exempt from all first year and annual car tax fees.

Are any more changes on the way?

While the government hasn’t announced any additional changes to the way new cars are taxed, it has said it wants to update the system at some point in the future.

There aren’t any concrete plans at the moment, though some of the ideas being floated around have been hinted at. These include replacing the tax bands with a granular system that raises tax rates in line with a car’s emissions, and making the cost of a car’s annual tax the same as its first year rate.

April 2020/2021 first year tax rates

VED band

C02 emissions (g/km)

Petrol and RDE2 diesel cars

Non-RDE2 diesel cars

A

0

£0

£10

B

1 to 50

£10

£25

C

51 to 75

£25

£110

D

76 to 90

£110

£135

E

91 to 100

£135

£155

F

101 to 110

£155

£175

G

111 to 130

£175

£215

H

131 to 150

£215

£540

I

151 to 170

£540

£870

J

171 to 190

£870

£1,305

K

191 to 225

£1,305

£1,850

L

226 to 255

£1,850

£2,175

M

Over 255

£2,175

£2,175