Understanding the car tax changes

The UK autumn statement from the Chancellor of the Exchequer was released on 22 November 2017. Within this Budget, there are important changes to the taxation policies on diesel vehicles. These changes only affect passenger vehicles. Commercial vehicles are currently exempt.

Vehicle Excise Duty (VED)

The VED increase will apply to new diesel vehicles registered on or after 1 April 2018, so that their first year rate will be calculated as if they were in the VED band above. This will not apply to next-generation clean diesels – those which are certified as meeting emissions limits in real driving conditions, known as Real Driving Emissions Step 2 (RDE2) standards.

The VED rates coming into effect can be found HERE

Source: Gov.uk; Autumn Budget 2017

*Cars with a list price of over £40,000 when new pay an additional rate of £310 per year on top of the standard rate, for five years.

**This rate applies to diesel vehicles that do not meet the real driving emissions step 2 (RDE2) standard.

The BVRLA have published further guidance to help with understanding RDE2 standards and have issued the following statement on the topic:

‘There are currently no diesel vehicles for sale today which meet RDE2 standards and from the BVRLA’s discussions with manufacturers we are unlikely to see vehicles which meet these standards before 2019.’

ŠKODA continues to liaise closely with the factory and industry bodies on this topic and we will update retailers as further information is available. VED information will continue to be supplied to retailers under the existing processes as models come to market.

What is RDE (Real Driving Emissions standard)?

RDE is the new Real Driving Emissions test; it measures vehicle pollutants, such as NOx, emitted by cars while driven on the road. RDE standards set a maximum permitted level of vehicle NOx emissions in real world driving situations.

Under RDE, a car is driven on public roads and over a specified range of different conditions. Specific emissions measuring equipment attached to the vehicle collects data to verify that legislative caps for pollutants such as NOx are not exceeded. RDE will not replace the new WLTP laboratory test, but complement it. RDE will ensure that cars deliver low emissions on-the-road.

Conditions include:

  • Low and high altitudes
  • Year-round temperatures
  • Additional vehicle payload
  • Up- and down-hill driving
  • Urban roads (low speed)
  • Rural roads (medium speed)
  • Motorways (high speed)

What is RDE2?

RDE2* is the second stage of the Government roll out of Real Driving Emissions testing and standards. Current vehicles are required to conform to the first set of standards released under the RDE testing regime.

  • RDE1 standards: 168 mg/km NOx emission limit (80mg/km x NOx conformity factor of 2.1)
  • RDE2 standards: 120 mg/km NOx emission limit (80mg/km x NOx conformity factor of 1.5)

*International Council on Clean Transportation; January 2017.

Passenger vehicles registered after 1 April 2018 certified with a RDE NOx emissions figure greater than the RDE2 standard or without a certified emissions figure will be subject to the supplement identified in the table above; in essence moving up by one VED band in their first year rate.

What is the impact for company car drivers?

The changes result in an increase of 1% to the supplement for company car drivers that choose a diesel vehicle. This will come into effect from 6 April 2018 and sees the current 3% charge increase to 4%. This diesel supplement is used to calculate company car tax and car fuel benefit charge, where the employer provides a diesel car available for private use. This will apply to all diesel cars registered on or after 1 January 1998 that do not meet the RDE2 standards. Commercial Vehicles remain exempt.

This measure will affect individuals who drive a diesel car provided by their employer and made available for private use where the car either has no registered NOx emissions value or does not meet the standard set out by RDE2. From 2019 onwards, employers will have to note reported NOx emissions for new diesel cars and check whether or not these meet the RDE2 standard. This information will be available on the Certificate of Conformity which lists the CO2 emissions figure and can be requested from the manufacturer.

The Company car tax rates coming into effect can be found HERE

Please contact our Sales Teams if you need further clarification on any matter concerning these changes.