‘Luxury’ car tax….a first world grumble

So firstly i’ll say I can’t afford a new car costing 40k. But I recently bought one second hand for under 30k, 1 year old, very low miles. List price of 40.3k. Presumably the original owner paid less than 40k for it

Transpired my purchase is still subject to the extra 400 quid a year charge, and will be for the next 4 years. I knew this at time of purchase and as I really wanted the car went ahead anyway, but still think it’s a pile of nonsense. Surely the tax should be based on what you paid for the car, not what you bought it for. Hypothetically I could have bought a heavier, more polluting car brand new for 39k and not be subject to the same tax

I don’t get what it’s for? If it’s based on being able to afford 40k for a car then fair enough, charge it on the cost you paid. If it’s based on emissions, road damage etc also fair enough. But charging it based on current criteria seems like nonsense to me.

I assume it’s based on the notional value fo the car over the first few years of its life, not just the initial purchase price. The latter would lead to all sorts of shenanigans with folk trying to avoid tax.

I got hit with this as well. I bought a second hand 2017 Skoda kodiak and ran it for 3 yrs and the tax was whatever the std car tax is these days. I got another one exactly the same, same spec, colour, engine, pretty much the same mileage second hand again (it was just chance that it was almost exactly the same as I needed a towbar and the car had one). I think the only difference was that it has a digital dashboard which I could take or leave if I’d have had an option. When I went to tax it it was rated as a luxury car as it was slightly over the £40K when it was brand new. It is a first world problem I guess but it seemed a little arbitrary considering how car values had gone up  but the threshold hadn’t and you’re paying vat on the full price when its first bought and then again second hand.

Harrumph

Absolutely..

Things must have changed if a second hand skoda is now classed as a luxury purchase!

Likewise, mine is a Seat, not a Bentley!

Looking at a 4 year old van (classed as a car) and the list was mid 40’s new. Just one of those things TBH for the first couple of years I’ll have it.

It does what it says on the tin.

It does what it says on the tin

Well technically it doesn’t. It’s officially called an ‘expensive car supplement’. You could quite conceivably by a 2nd hand care for 10k that would fall foul of this, but 10k for a car isn’t what I would class as expensive by any stretch.

Is it a slightly disguised vaguely SUV tax? I can see the need for that (different thread) but no idea how it would be justified in its own right.

I suppose the thinking is, if you can afford a £40k car then you can afford to tax it? That’s a quarter of what I paid for my house, for a rapidly depreciating asset vs something still appreciating 100+ years after it was built.

I dunno. If vehicle tax was based on second-hand purchase price then it’s open to a tax dodge. I buy a new car for £40k then immediately sell it to my partner for £1.

I suppose the thinking is, if you can afford a £40k car then you can afford to tax it? 

I totally get that rational. But I couldn’t afford a 40k car, I couldn’t even afford a 30k car, yet I’m still subject to it.

Fair point about the tax dodge comment.  I’m sure some greedy tax dodgers would try to game the system,

Surely the tax should be based on what you paid for the car, not what you bought it for.

¯\_(ツ)_/¯

^

Yeah made no sense. I meant what it was originally bought for

Indeed I always thought it was an increase in tax for higher polluting cars, higher value/luxury and a deterrent to keep buying new cars.
Considering you can get a modest car under £30k, it seems reasonable.
IMO, like council tax, it should be a percentage of when new list price.

It’s a hard knock life…

The latter would lead to all sorts of shenanigans with folk trying to avoid tax.

Well sir, if you would like us to fit some new wiper blades for a mere £20,000 I might just be able to knock, oooo, £19,995 off the car which by sheer coincidence brings it under the £40k.

Presumably the £400 a year tax is reflected in the second hand price though.

Cougar2

Free Member
I suppose the thinking is, if you can afford a £40k car then you can afford to tax it? That’s a quarter of what I paid for my house, for a rapidly depreciating asset vs something still appreciating 100+ years after it was built.

I dunno. If vehicle tax was based on second-hand purchase price then it’s open to a tax dodge. I buy a new car for £40k then immediately sell it to my partner for £1.

Well I don’t  know when you bought that but look at the market now, the average house price in England is £310K.

The £40K tax point is now hitting a lot of pretty normal cars (e.g. VW Passat), if it had been adjusted with inflation, it should be closer to £50K.

It’s a spite tax.  Damn you, or the original purchaser for being capable of buying it. You should know your place and get back on the poverty wagon.

in reality the move from emissions-based VED to this blanket flat rate system was an incredibly badly thought out way of recouping the drop in revenue as manufacturers moved to make less environmentally damaging vehicles.  The way the public embraced small engine capacity should have been applauded, instead the treasury went “oh crap everyone’s buying Octavias with 1.4l turbos and only having to pay £30 VED. Let’s move back to the 1980s system!” This was combined with a massive increase in the use of expensive technology in vehicles which kicked many into the +£40k bracket.

deterrent to keep buying new cars.

Well if it was only on new cars then that would make sense.

It should be done on emissions and weight imo. Right now it doesn’t know what it is..currently a luxury ev is not subject to the charge (although it would be in future), so if I’m lucky enough to afford a new top of the range Tesla I am exempt.

Likewise Id currently pay the same additional cost for a massive 150k + range rover brand new off the show room floor as i would a second hand skoda.

It’s to kill tax scams, and people buying and spelling to/from their kids, cat etc.

First world problem, tax on value and emissions is ok by me

is..currently a luxury ev is not subject to the charge (although it would be in future)

EVs subject to the same rules starting next year isn’t it?

EVs subject to the same rules starting next year isn’t it?

Yep

https://www.pendragonvehiclemanagement.co.uk/news-insights/ved-rates-due-to-change/

says the gov may increase threshold, but that’s less money in the pot  if they do

The £40k threshold for the “expensive car charge” was introduced in 2017. It hasn’t changed since. Car prices have gone up a lot (way more than inflation) in the last 7 1/2 years.

A decent spec A4 or 3 series would have been comfortably under £40k in 2017, they are more like £45-50k now.

Its another example of “fiscal drag”  – see also income tax bands being frozen from about 2021 through to 2027.

If its any consolation pre  april 2017 cars are subject to CO2 based tax bands. I was looking at a car recently – the post april 17 was £180 to tax , same car registered in feb 2017 was £350.

Mrs S fell foul of this when she bought a 6 month old Mini Countryman PHEV. She’s really pissed when the tax on my 3 litre diesel comes in at half the price of her tax.

but 10k for a car isn’t what I would class as expensive by any stretch.

Whereas to people living in the real world it’s a bloody fortune. Wake up and realise that you’re one of the fortunate ones. Anybody getting pissed off by this tax needs a good talking to.

It’s a spite tax.  Damn you, or the original purchaser for being capable of buying it.

introduced by the tories. How did they sell the idea to their voters (or even themselves) at the time?

Pretty normal A4 estate here. Bought when it was just shy of 3 years old, need to keep paying this tax until it’s hits its 6th birthday. Really does seem like a sneaky grab that it’s not increased alongside the prices of the cars themselves.

Also, there seems to be confusion about what the £40k limit means. It’s the list-price, so getting a discount on a new car wouldn’t really help.

I knew this at time of purchase and as I really wanted the car went ahead anyway

It didn’t stop you buying it, so are you just moaning?

My current car was bought secondhand, but I’d had a +£40k car before and knew of the tax cost – as I’m doing the deal with the dealer I looked at the original bill and saw it was £40,042, so knew it was also over.

During negotiation I asked for 12m tax, after a bit of haggling the Salesman agreed – only later after we’d shook on the deal did he realise 🙂

I knew this at time of purchase and as I really wanted the car went ahead anyway

I’m really struggling to see what you’ve got to complain about. It’s a tax, it’s pretty arbitrary (as a lot of taxes are) but you were fully aware you were going to have to pay it, it’ll have been priced into the price you paid by the market and being fully aware of it you presumably made an informed decision that you were able to afford it. That’s pretty much it, isn’t it?

I’m paying £335 on my 23 year old car – 177g co2 petrol. So it will go to £200 + £400 with a 4 year old van (car class) for a year or two – you just have to factor it in.

Most new EV’s are over £40k these days, then again most are leased, so won’t quite matter the same as those that ‘buy’ a used car.

Whereas to people living in the real world it’s a bloody fortune. Wake up and realise that you’re one of the fortunate ones. Anybody getting pissed off by this tax needs a good talking to.

this so very much

but 10k for a car isn’t what I would class as expensive by any stretch.

Its 20x what my cars cost.

I nearly put that it’s 20 Porsches!

It should be done on emissions and weight imo.

First year road tax is. Anything over 255g/km is £2745 road tax it’s the first year. Problem is that it’s hidden in the OTR price and included in any finance or lease deals. If it was a separate cash  payment people had to make they would be a lot more thoughtful about it.

The expensive car tax isn’t charged the first year but for five years afterwards. ie years 2 to 6.

Whereas to people living in the real world it’s a bloody fortune. Wake up and realise that you’re one of the fortunate ones. Anybody getting pissed off by this tax needs a good talking to.

Indeed.
I pay for the camper too – a big, polluting, luxury vehicle, so my £335 seems a bargain.

I thought i’d see if there is any information on STW demographics – turns out STW do a reader survey! Was pretty surprised to see that there are more STW readers who have a household income of £100k+ than there are that have a house income under £50k. Indeed 5% of the households have incomes of £200k+ with the most common bracket being £75-100k.

The thought was triggered by a comment above and since I found in the info I thought i’d share – based on this 10k doesn’t seem an unlikely amount for the majority of STW readers to spend on a car.

Below £20k: 50 households

£20k – £30k: 60 households

£30k – £40k: 100 households

£40k – £50k: 150 households

£50k – £75k: 350 households

£75k – £100k: 375 households

£100k – £150k: 250 households

£150k – £200k: 100 households

£200k+: 75 households

Surveys

Fiscal drag. £40k car isn’t quite the luxury it used to be.

Plenty of people will be happy about it though as they don’t like others having nice things. Either because they can’t afford them, or because they don’t want others having what they can afford.

and you do really believe that people fill those surveys in honestly.