Summer Budget 2015: How It Affects Motorists

By Blind Spot DriveBlog

Summer Budget 2015: How It Affects Motorists

Outline of the Article

1. Introduction
   • Overview of the Summer Budget 2015 changes for motorists
   • Brief introduction to Chancellor George Osborne’s announcement
2. The Big Changes in Vehicle Excise Duty (VED)
   • What is Vehicle Excise Duty?
   • Introduction to the new VED system
   • Differences between the old and new VED system
3. The Impact of CO2 Emissions on Vehicle Taxation
   • The 13 new taxation bands based on CO2 emissions
   • Explanation of how VED will be calculated for new cars from 2017
   • How the new system benefits or affects different motorists
4. The Simplified VED System for Older Cars
   • How VED will change for cars older than one year
   • The three new bands: Zero Emission, Standard, and Premium
   • Who will benefit from the simplified system?
5. The Premium Band: A Major Shift in Vehicle Taxation
   • How the Premium band works
   • The implications for high-value cars (those costing over £40,000)
   • Impact on luxury car owners
6. Cost Breakdown of VED After 2017
   • Detailed breakdown of the VED system: Year 1 and standard rates
   • Potential savings for the majority of Motorists
   • Comparison of the new rates with the old system
7. What Does the New VED System Mean for You?
   • Potential savings for 95% of Motorists
   • How to calculate the VED for your car
8. Roads Fund: The Promise of Better Roads
   • Explanation of the new Roads Fund created by the VED system
   • How this will impact road maintenance and infrastructure
9. Fuel Duty and MOT Changes
   • Fuel duty freeze for the remainder of 2015
   • Potential increase in MOT interval from 3 to 4 years
   • How these changes could affect Motorists
10. What Will Happen to Older Cars After 2017?
    • How the new changes only apply to cars bought after April 1, 2017
    • Existing cars: What happens under the old VED system?
11. How to Prepare for the Changes
    • What drivers should consider when buying a car
    • Tips for adapting to the new VED system
12. Pros and Cons of the New System
    • Advantages of the new VED system for most Motorists
    • Criticisms of the new system, particularly for luxury car owners
13. The Impact on the Car Market
    • Effects of the changes on car buying and selling patterns
    • How the new tax bands may influence car choices
14. The Bigger Picture: Long-term Effects of the Budget
    • How these changes fit into broader economic strategies
    • The long-term impact on car ownership and road infrastructure
15. Conclusion
    • Summary of the changes and what they mean for Motorists
    • Final thoughts on the 2015 Summer Budget’s impact

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Summer Budget 2015: How It Affects Motorists

Introduction

In 2015, Chancellor George Osborne unveiled a Summer Budget that left many drivers with mixed feelings. Amid headlines about wage increases and benefits cuts, the motorist community was also set for some fundamental changes in the cost of car ownership. From adjustments to Vehicle Excise Duty (VED) to a new system for MOTs and fuel duty, the Summer Budget 2015 aimed to address a variety of issues affecting car owners. But how exactly do these changes impact you, the driver? Let’s break down what you need to know.

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The Big Changes in Vehicle Excise Duty (VED)

What is Vehicle Excise Duty?

For many motorists, Vehicle Excise Duty (VED) is a familiar term – it’s the tax paid to the government to own a car on UK roads. Until now, the VED has been calculated based on a car’s CO2 emissions, with different rates depending on how eco-friendly the vehicle is. But from 2017, Osborne’s budget introduced a significant overhaul of the VED system, which will affect how much drivers pay for their car tax.

Introduction to the New VED System

The new VED system will be structured around 13 taxation bands, based on CO2 emissions. While this approach is similar to the previous system, the major shift will occur after the first year of car ownership. From 2017 onwards, cars will no longer be taxed according to their CO2 emissions alone, but with a new focus on a vehicle’s cost and environmental impact.

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The Impact of CO2 Emissions on Vehicle Taxation

The 13 New Taxation Bands Based on CO2 Emissions

The new VED system will apply to all new cars purchased from April 1, 2017. The 13 taxation bands are designed to encourage the use of lower-emission cars by offering reduced tax rates for environmentally friendly vehicles. Cars that produce as little as 1g/km of CO2 will pay just £10 in tax for their first year, while the most polluting cars (those emitting over 255g/km) will face a hefty £2,000 tax bill in their first year.

How the New System Benefits or Affects Different Motorists

This new system is beneficial for many car buyers. For those choosing low-emission or electric vehicles, the tax burden will be light. On the other hand, Motorists of large, polluting vehicles will face higher taxes, reflecting their environmental impact. The changes offer a more progressive approach to car taxation, aiming to encourage cleaner cars while penalizing excessive emissions.

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The Simplified VED System for Older Cars

How VED Will Change for Cars Older Than One Year

After the first year of ownership, the VED system will change. Instead of using the complex 13-band structure, cars older than one year will be placed into one of three simplified bands: Zero Emission, Standard, and Premium. This approach makes things easier to understand and ensures that the tax system remains manageable.

The Three New Bands: Zero Emission, Standard, and Premium

• Zero Emission: Cars that produce 0g/km of CO2, such as electric vehicles, will be exempt from VED.
• Standard: Most cars, including hybrids and those with low emissions, will fall into this band and pay a flat rate of £140 per year.
• Premium: If your car cost over £40,000 when you bought it, you’ll face a £310 annual supplement on top of the £140 flat rate, totaling £450 annually for the first five years of ownership.

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The Premium Band: A Major Shift in Vehicle Taxation

How the Premium Band Works

The introduction of the Premium band marks a significant departure from the previous system. Rather than being based on CO2 emissions, this band is determined by the initial purchase price of the car. If you paid more than £40,000 for your vehicle, you’ll have to pay a higher annual tax for the first five years of ownership.

Impact on Luxury Car Owners

Luxury car owners are set to feel the impact of this change. While they may have been exempt from higher VED in the past, the new system now targets them based on the vehicle’s cost, rather than its environmental footprint. This could discourage some buyers from purchasing high-end vehicles, while others might face significantly higher tax bills.

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Cost Breakdown of VED After 2017

Detailed Breakdown of the VED System: Year 1 and Standard Rates

For those purchasing a new car after 2017, the first-year tax will depend on the car’s CO2 emissions. After the first year, the car will be placed in one of the three bands, with the following tax rates:

• Zero Emission: £0
• Standard: £140 per year
• Premium: £450 per year (for the first five years)

Potential Savings for the Majority of Motorists

The new system is expected to save 95% of drivers money. With the average VED reducing from £166 to £140, most people will experience a reduction in their annual tax bills.

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What Does the New VED System Mean for You?

For the majority of Motorists, these changes will mean lower costs in the long run. The switch to a simpler system is expected to benefit those with low-emission vehicles the most, with tax savings likely for those who opt for electric or hybrid cars. Understanding the new system allows Motorists to anticipate their future tax bills and make informed decisions when purchasing a car.

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Roads Fund: The Promise of Better Roads

The Chancellor has also proposed that funds raised from the new VED system will go towards a new Roads Fund. This fund will be used to invest in fixing Britain’s potholed roads. The promise of improved infrastructure may reassure Motorists, although the long-term effects of this investment remain to be seen.

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Fuel Duty and MOT Changes

Fuel Duty Freeze for 2015

As part of the budget, Osborne announced that fuel duty would remain frozen for the remainder of 2015. This is good news for motorists who were concerned about rising fuel costs.

Potential Increase in MOT Interval from 3 to 4 Years

A consultation has been launched to explore the idea of increasing the time between MOTs, from the current three years to four years. This could save motorists money and reduce the frequency of mandatory inspections, but it remains to be seen whether this change will become law.

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What Will Happen to Older Cars After 2017?

Existing cars will not be affected by the new VED system. The changes will only apply to new vehicles purchased after April 1, 2017. Therefore, Motorists of older cars will continue to use the current VED system.

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How to Prepare for the Changes

If you’re planning to buy a new car, it’s important to consider how the new VED system might impact you. If you’re buying a car before April 2017, you’ll be unaffected by the changes. However, if you’re thinking about a car purchase after that date, understanding the new tax bands will help you choose the most cost-effective vehicle.

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Pros and Cons of the New System

Advantages for Most Motorists

• Reduced tax for low-emission vehicles
• Simpler system for cars older than one year
• Predictable costs, with fewer variables

Criticisms of the New System

• Luxury car owners will face higher taxes
• Some critics argue that the system doesn’t go far enough to encourage electric cars

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The Impact on the Car Market

The new VED system could have a profound effect on the car market. It may encourage the purchase of more environmentally friendly cars and discourage the purchase of expensive, high-emission vehicles. Car dealerships may adjust their offerings to cater to the new tax bands.

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The Bigger Picture: Long-term Effects of the Budget

These changes are part of a broader economic strategy aimed at improving infrastructure and reducing emissions. While the immediate impact may be felt in car ownership costs, the long-term effects could include a shift in consumer behavior and investment in road maintenance.

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Conclusion

The Summer Budget 2015 has introduced significant changes to the way motorists are taxed. With a focus on CO2 emissions, vehicle cost, and a simplified system for older cars, the new VED system promises savings for most drivers. However, luxury car owners may face higher taxes, and the potential impact on the car market remains to be seen. Regardless, these changes signal a shift towards a more environmentally focused and cost-conscious approach to car ownership.

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FAQs

1. When will the new VED system come into effect?
   • The new system will apply to all new cars purchased from April 1, 2017.
2. How much will I pay in VED for a low-emission vehicle?
   • If your car produces zero emissions (e.g., an electric car), you will pay no VED. If it’s low-emission, you will pay the standard rate of £140.
3. What happens if I own a car worth more than £40,000?
   • If your car costs over £40,000, you will pay an additional £310 supplement for the first five years of ownership.
4. How will the new Roads Fund affect road maintenance?
   • The new Roads Fund will aim to invest in fixing the UK’s potholes and improving infrastructure, though the full effects are yet to be seen.
5. Will these changes apply to my existing car?
   • No, the new VED system only applies to cars purchased after April 1, 2017. Existing cars will remain under the old system.

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