ROAD tax rates from 2018 include a diesel supplement.

The road tax diesel supplement is payable in the first year for diesel cars registered from 1 April 2018. It follows the major vehicle excise duty changes introduced from April 2017 that encouraged drivers to choose lower CO2 emissions vehicles, while penalising cars with higher CO2 levels.

The diesel supplement was announced by Chancellor Philip Hammond in the 2017 Autumn Budget, together with an increase in the company car tax diesel surcharge from 3% to 4% also from 1 April 2018.

The move – to confront the issue of nitrogen oxides and particulates from diesels – follows the April 2017 introduction of the new road tax system with first year duty rates based on a scale of CO2 emissions. These are measured in grams/kilometre from £0 for zero emission electric cars to £2,000 for the highest emissions from petrol and diesel cars.

With the new diesel supplement the stated intention is to create a £220 million Clean Air Fund for local areas with high air pollution levels. Local authorities are encouraged to help people reduce air pollution through reducing the cost of public transport for those on low incomes or modernising buses with more energy efficient technology.

The Chancellor said the money will come from “a temporary rise” in company car tax and vehicle excise duty on new diesel cars. These are diesel cars which do not meet the standard set out under Annex IIA of Commission Regulation (EU) 2017/1151 for the second stage of Real Driving Emissions RDE 2 which will be set in legislation at a value of nitrogen oxides (NOx) no greater than 80mg/km.

However although RDE1 was introduced in September 2017, Driving Emissions, stage 2, isn’t due until at least 2020.

This means that even if the cars meet the standard we won’t know because certification is not possible until 2020. And so until then every new diesel and every business driver of a new diesel will be charged extra tax.

The RDE2 standard sets a maximum permitted level of car NOx emissions in real world driving situations, and it is measured through portable emissions-measuring equipment in a variety of real driving trips. Cars must pass the certified level of NOx emissions irrespective of the driving behaviour during the test – for example, the level of emissions produced when an engine is under stress, say, by driving uphill.

Manufacturers will certify NOx emissions. The certificate of conformity manufacturers produce will record which Euro-standard the vehicle is certified to. Diesel cars registered after 1 April 2018 and certified with a real-world NOx emissions figure greater than the RDE2 standard or without a certified NOx emissions figure will be subject to a supplement to the effect that these cars will go up by one VED band in their First-Year Rate.

Although the standard will not apply for two years, the Government papers anticipate a declining income from this surcharge before then.

Exchequer impact of diesel surcharge (£m)

The Government says the impact in First Year Rates depends on vehicle choice, giving as examples someone purchasing a typical Ford Focus diesel paying an additional £20 in the First Year, a VW Golf an extra £40, a Vauxhall Mokka £300 and a Land Rover Discovery £400.

Editor’s Note:
100% rates exemption and 50% rates discount will continue to be available to people in receipt of the mobility component of Disability Living Allowance or Personal Independence Payments.

Vehicle Excise Duty rates

First Year Rates (FYRs) of VED vary according to the carbon dioxide (CO2) emissions of the vehicle, with the diesel surcharge imposed from April 2018. A flat Standard Rate (SR) of £140 applies in all subsequent years, except for zero-emission cars for which the SR will be £0.

Cars with a list price above £40,000 will attract a supplement of £310 on their SR for the first five years in which a SR is paid.

All cars first registered before 1 April 2017 remain in the current VED system and do not change.

The new rates and bands for the post-April 2017 VED system are set out in the table below.

New Vehicle Excise Duty rates – for petrol/diesel/electric cars registered from April 2017 and diesels from April 2018.

Note: AFVs including hybrids and LPG pay £10 less on 1st year and Standard Rate