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Idly car window shopping at the moment.
The "luxury tax" add on to VED is described as.
"If the list price of a car is over £40,000, then an extra £355 will be payable from the second time the vehicle is taxed for up to 5 years"
Further reading implies that this means you pay the added rate for years 2 to 6. Taxing a car after its 6th birthday, it reverts to £165.
But... VED renews with a new owner.
If I'm looking at 2017 cars, that 6th birthday will be coming up in the next couple of months.
Do I have to pay the full amount or can it be pro-rated for the, say, 3 months remaining of the higher rate?
Any other way around this other than avoiding buying a just-under-6-year old car?
You're going let £355 affect your decision to pay £40,000 on a car? Or have I misunderstood?
You’re going let £355 affect your decision to pay £40,000 on a car? Or have I misunderstood?
The extra is based on list price when new, not current selling price
You’re going let £355 affect your decision to pay £40,000 on a car?
It's not though.... it's £1755.
It's not £1755 if he buys a car with one year left as per the op!
Pay the VED for 6-months. If the anniversary is within that period, SORN it at the end of the month, then renew the folowing day (at the reduced annual rate).
You’re going let £355 affect your decision to pay £40,000 on a car? Or have I misunderstood?
Its a car that was £40k+ (nearly) 6 years ago.
So its either £355, some fraction of £355, or nothing if I wait for one thats past its 6th birthday.
My current car has this, I bought it at 6 months old and new it was £40,200...
Unsure though what happens when it hits it's 6th birthday - hadn't thought about it TBH.
Pay the VED for 6-months. If the anniversary is within that period, SORN it at the end of the month, then renew the folowing day (at the reduced annual rate).
had forgotten about the 6 month option. (current car is one of those cheating VAG diesels, £20 p/a)
Do I need to SORN and renew, or will my renewal at 6 months time be at the lower rate?
It's never £1755 😜.
The question I guess really is that extra VED once per year or pro rata. Will the old owner have paid it and that's it or do they get a partial refund on that part. If pro rata buy just enough tax to get over 6 years old then but a full year. Should only be a small amount then.
Why is it an issue, it will be like 2% of the purchase price and you might save that money on one car, but then have to spend even more on a new set of tyres, whereas on another car you might pay the extra tax, but not have to fork out for a new set of tyres until a year or 2 later. On the grand scheme of things it doesn't really matter IMHO. It is more important to buy the best car in the best condition at the point in time as long as you can afford it.
I wouldn't begrudge it for a whole year. Its the possiblity of this being an extra fee for potentially one month or less if there is no pro-rata or refund available that irks me.
I got caught out in my ignorance 2 vehicles ago. Car first registered a few weeks after the rules changed to being emission based. Was paying a fortune for an low powered hatchback.
Jokes about cyclists trying to evade road tax welcome.
I had this recently on a Dec-17 registered car I bought in Jan-23. It will drop from £520/year to £165/year in Dec-23 on its 6th birthday so when I taxed it at purchase at the start of Jan the vehicle tax period was 12 months but the amount was a little bit less than £520 I assume to take account of the ~2 weeks or so between Dec reg date -Jan purchase date.
Daft question, but why is there an additional charge at all? Surely the VED is based on emissions, so why would a car costing over £40k then have an increased charge as the emissions haven't changed just because the price is higher (if the same engine is available in a lower spec model for under £40k).
As much as I'm happy for people to pay taxes, based on my thick misunderstanding of what has been typed in this thread, it apears that people rich enough to buy a very expensive car are then being fleeced for more money just because they can be - is that it?
If so, why would the second owner then have to pay for any of this fleecing?
See it as a wealth tax which is the best way of taxing as difficult to avoid in this case and you know those rich people find ways to avoid taxes unlike us PAYE people...
Daft question, but why is there an additional charge at all? Surely the VED is based on emissions, so why would a car costing over £40k then have an increased charge as the emissions haven’t changed just because the price is higher (if the same engine is available in a lower spec model for under £40k). As much as I’m happy for people to pay taxes, based on my thick misunderstanding of what has been typed in this thread, it apears that people rich enough to buy a very expensive car are then being fleeced for more money just because they can be – is that it?
That seems to be the gist of it. possibly also as a precursor of moving away from emission based taxation in anticipation of electric cars.
There's also now a massive extra tax on year 1 which I was unaware of, as I've never been in the position to buy a new car.
ayjaydoubleyou
one of those
cheatingVAG diesels tuned to pass a very particular test
FTFY
the inital VED is always a stupid amount,
2nd year to 6th year is cars under 40k new = £140 pa and cars over 40k = 140 + 355 (495) pa VED
Then after 6 years it goes to 140 pa
Surely the VED is based on emissions
Because it's not - it's based on emissions and value.
unlike us PAYE people
PAYE here, can't avoid it, also screwed as the price was just below £40k when I ordered but due to a list price increase in the intervening ten month wait it was over £40k when I picked it up. Ironically if I'd gone for the less efficient petrol only rather than hybrid model it would have been below the threshold.
There will be a lot more people caught by this as the threshold is not going up but the price of vehicles is going up. £40k may sound a lot for a car but what I bought isn't a massive German repmobile, it's a fairly standard if rather well speeded family car.
It's fair to say it's not a lot compared to the purchase price but it's still not very fair but there's a massive problem coming with EVs and no fuel duty so they need to claw back the money somehow.
So why reduce the cost? If it is pretty much just because it is an expensive car, why not just make the ved expensive instead of the changes?
So why reduce the cost? If it is pretty much just because it is an expensive car, why not just make the ved expensive instead of the changes?
Because why should someone who buys a 10-year-old barge with 150,000 miles on it pay taxes on it as a luxury item, when a brand new car with no squeaks, rattled, torn seats, broken electronics pays nothing?
Agreed, but they aren't buying the car at list price, so second hand shouldn't have the higher cost at all...
If the VED surcharge wasn't paid by second owners you'd get people buying an expensive new car then selling it to their spouse the next day.
People buying second hand don't pay the extra rate after year 6 (at which point it should still have some semblance of luxury), people buying the new car pay. It's just a bit of a cliff edge, maybe there should be a middle rate for cars between £25k and £40k. It just feels very arbitrary, at least with the old system if you went for a smaller engine which is usually more environmentally friendly and cheaper you paid less VED. The government pulled in most of its revenue through fuel duty which is a really good environmental tax, drive poorly, have a big engine or inefficient car, drive a lot in congested places and your fuel economy goes down and you pay more tax. There isn't really an equivalent for electric vehicles unless SMART meters are a lot cleverer than we thought.
The big issue is around EVs, there aren't many on the market except really small ones below £40k, certainly family sized ones are that and more. Really prices a lot of people out and then a VED wallop on top.
Fine, let them sell it on, the first owner should pay it all anyway...
Fine, let them sell it on, the first owner should pay it all anyway…
Yep, the first buyer should pay 20% of the value directly yo the government on purchase. Second hand buyers should be exempt from paying this.
(I also don’t quite understand how it works when vans/trade vehicles are for sale s/h as ‘no vat’ but that’s a different topic.)
(I also don’t quite understand how it works when vans/trade vehicles are for sale s/h as ‘no vat’ but that’s a different topic.)
That’s simple. If you are not VAT registered then you can’t charge it when you sell.
But usually the non vat vans are priced at 20% higher anyway so a non vat buyer pays the same ( is that the bit you mean ?)
The big issue is around EVs, there aren’t many on the market except really small ones below £40k, certainly family sized ones are that and more. Really prices a lot of people out and then a VED wallop on top.
There’s no extra ( or any VED in fact) to pay on a BEV until April 1st 2025 anyway
It just feels very arbitrary
It is, but at least it's arbitrary mostly the right way,
Unlike most ULEZ schemes which target the drivers of old stuff and shiny new motors are exempt.
it apears that people rich enough to buy a very expensive car are then being fleeced for more money just because they can be – is that it?
Yep, it's very much an avoidable tax (the wealthy do like taxes to be avoidable), but if we're not going to "fleece" rich people buying fancy cars, which other wealth hoarders are more deserving of taxation? We already have stamp duty on houses this is just a posh car stamp duty.
If so, why would the second owner then have to pay for any of this fleecing?
Anyone buying a 5 year old Beemer or Merc is probably not a pauper, and a quick DVLA search of the reg should tell you it's VED cost, factor it in and if that puts you off maybe you're just not ready for used luxury motors 😉
Aha
But this extra tax should reflect the value of the second hand car.
Take two identical cars, A £39999.99 and B £40000.01
At 5 years old, if A is £10000 then you should not pay more than £10000 - £355 for B.
Therefore the wealthy person who bought the car DOES pay the tax by not getting as much for it.
Aha
If you like, but really does it matter?
If you're a old enough and rich enough to even need to consider these issues just deal with the increased VED or buy a cheaper car (that is still an option you know), they had to set a boundary somewhere and £40k + 6 years seems about right, if a manufacturer can keep the new price under that bar then great, their customers (and later 2nd hand customers) save some pocket change and they might score sales.
If you have to spend over £40k then least you get to make that humblebrag that your car is so fancy you have to pay a luxury tax...
Question: does it apply to company cars too?
Not in the market for a luxury car so wasn’t aware of this. So even if I buy a 3 year old car for 20 k, if it’s worth 40 when brand new I have to pay the extra tax for 3 years? Seems harsh
I thought there was a push for people to buy cleaner electric cars yet you’ll now get hit for extra tax if you do.
Also, whilst 40 k is more than I’ve ever spent on a car in my life, is a car costing that really considered ‘luxury’ nowadays? The base model 3 series with no extras cost just 500 quid shy of that. Obviously other far cheaper cars are available …
I thought there was a push for people to buy cleaner electric cars yet you’ll now get hit for extra tax if you do.
Not until 2025 for full electric
I guess they might revise cost points by then as well ?
a quick DVLA search of the reg should tell you it’s VED cost
Sneakily the VED rises annually but the £40k threshold hasn’t budged since it was introduced. I wouldn’t even qualify a £40k car as particularly luxurious today compared to when introduced in 2017.
They should do this for all SUV's at any pricepoint, and make it payable for the entire ownership span of the vehicle.
I clearly don't pay attention, but I still think a car over £20k is luxury - plenty of cars less than that do the same job but may not be as nice a place to be sitting or be seen in...I'm very uch aware that things are costing far more these days, what I don't quite understand is how 'we' can afford all these higher prices as I'm unaware of anyone getting wage increases matching this rise...so I'm clearly not doing something right as I can't afford a £20k car let alone a fancy car costing twice that.
Saying that, the Kia C'eed I was in a few days ago felt a very nice place to be - don't think that cost £20k, but it was definitely feeling very nice.
Horses for courses and all that...the £40k price tag is completely irrelevant to me as I'd never spend that on a tool to get me elsewhere without wearing out my shoes.
Saying that, the Kia C’eed I was in a few days ago felt a very nice place to be – don’t think that cost £20k, but it was definitely feeling very nice.
2023 Kia C'eed RRP £22,545 - £31,145
This was a 2020 Kia C'eed, unsure of model but I've assumed it was under 20k, if it isn't then that is probably why I'm thinking it is a nice place to be...as it is 'luxury'!
https://www.carmagazine.co.uk/car-reviews/kia/ceed-hatchback/
just under £19k as a minimum back then.
So wasn't too far off with my guess but also surprised it was that much. I love the idea of loads of power and fast acceleration, but runnings costs (fuel, tyres, servicing, ved) puts me right off. To me a car is just a means of getting me elsewhere without wearing my shoes out (as I said earlier), so my expectations of what it does aren't very high, which I think results in me thinking cars are already expensive when they get close to 20k.
This luxury tax is never going to impact me...and I apologise for slightly derailing this topic - started out not quite understanding it and ended up berating the idea, sorry.
bare in mind that a hybrid astra starts at £37k, and you can understand where the price of cars and "luxury" has separated.
Really? Good grief...so back to my other question - how are people affording these? I'm very aware everything has risen cost-wise, but I'm not aware wages have risen much (if at all)...
That sounds absolutely bonkers to me.
Ah, but almost nobody pays £40k + for a new car. They pay maybe £18k over 3 years and then get another new one.There’s a difference between list price and on the road price, the latter includes your first year luxury tax etc and is lumped in with your monthly payment. It’s all about the monthly’s 😉
Not in the market for a luxury car so wasn’t aware of this. So even if I buy a 3 year old car for 20 k, if it’s worth 40 when brand new I have to pay the extra tax for 3 years? Seems harsh
It's for an extra 2 years.
And not "worth", but the new List Price (including any factory fit extras).
The thing that irritates me most about this luxury car tax is that the threshold hasn't changed since 2017, whereas new car prices have gone up massively in the same period
As an example - a nice Audi A4 Avant s-line 2 litre petrol was £35k back in 2018 - fancy car but not "luxury". the same car now is a smidge over £40k and therefore attracts the luxury tax.
a lovely example of fiscal drag - by doing nothing the government is extracting an extra £1775 from people buying quite ordinary vehicles.
The other thing is that people don't notice because leasing is so popular and the VED is built into the cost of the lease (not PCPs)