Emergency budget 2015: The good, the bad and the expensive for drivers

Emergency budget 2015

No breaks: Mitsubishi Outlander is currently the UK’s favourite plug-in car but won’t get cheap road tax from 2017 (Picture © Mitsubishi)

Drivers were both winners and losers after the Emergency budget of 2015. All drivers will have to pay more for insurance. Meanwhile, a change to the way Vehicle Excise Duty is structured will make eco cars and more expensive motors pricier to put on the road. Here’s how the budget will affect drivers. 

Emergency budget 2015: Fuel duty stays the same

All drivers will be grateful that the chancellor has frozen fuel duty for another year. Owners of new cars will also be pleased that MOT roadworthiness tests won’t be required now until a car gets to four years old. Cars currently need an annual MOT test after from three years old.

Emergency budget 2015: Road tax to go up

The Vehicle Excise Duty system (road tax) will be thoroughly overhauled. From April 2017, there will be three VED bands: zero, standard and premium. This will replace the current 13 bands governed by carbon dioxide emissions. According to the treasury, 95 per cent of cars will be covered by a standard ‘flat rate’ tariff, costing £140 a year. The only cars in the zero band, meaning they won’t have to pay any road tax, are those that don’t emit any carbon such as electric cars.

Emergency budget 2015: What the tax changes mean

The chancellor said the tax bands would apply to new cars from April 2017. It comes after increasing sales of eco cars were threatening a tax black hole. Existing cars would be unaffected. It means future buyers of hybrid and very low carbon dioxide diesel cars, who currently pay no VED or very low rates of it, will see a significant road tax rise.

Emergency budget 2015: What the experts think

Mike Hawes, chief executive of the Society of Manufacturers and Traders, said: “The Chancellor’s Budget announcement on the VED regime came as a surprise and is of considerable concern. While we are pleased that zero-emission cars will, on the whole, remain exempt from VED, the new regime will dis-incentivise take-up of low emission vehicles. New technologies such as plug-in hybrid, the fastest growing ultra-low emission vehicle segment, will not benefit from long-term VED incentives. This will threaten the ability of the UK and its automotive sector to meet ever stricter CO2 targets.”

Emergency budget 2015: Expensive cars hit

The drivers of cars that cost more than £40,000 will be hit by an annual road tax premium of £310 a year for the first five years of the car’s life. It means their annual road tax will be £450. The chancellor told MPs that the system will be fairer to motorists and said changes to VED will raise more than £3 billion in the three years after they’re introduced. And he added that “every single penny raised in vehicle excise duty in England” will go into the new roads fund to pay for the “sustained investment our roads so badly need”.

Emergency budget 2015: Insurance to go up

Perhaps the least welcome of the changes is the increase in Insurance Premium Tax. This will affect all drivers (and home owners) from November 2015. Insurance providers have to pay the tax which will rise from its current 6.5 per cent to 9 per cent. The increase is likely to be passed to customers and is expected to add around £100 a year to cover costs for the average family. The tax swoop is expected to net the treasury £8 billion over the next six years. The British Insurance Brokers’ Association described it as a stealth tax.

Emergency budget 2015: No-win no-fee companies capped

Claims management companies, the firms that make their money out of accident victims’ compensation, are to be curbed. The fees they charge are to be capped. The hope is the companies will be dissuaded from pestering people with phone calls. Claims companies have also been accused of hiking the price of insurance premiums by encouraging people who perhaps wouldn’t otherwise claim to maximise compensation.

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