You can enjoy the BMW i3, Ford Mustang, Audi S3 and Volkswagen Tiguan without lining the taxman's pocket when road tax rules change on 1 April
Nic Cackett
28 March 2017

New road tax changes mean that from 1 April the cost of new car ownership will rise for many buyers. But which cars are affected and how can you beat the system?  

Let’s talk about £40k.

This significant but cannily less than exorbitant amount of money is about to become a crucial figure in the financial minefield of new car buying.

Why? Because that’s the apparently arbitrary sum the government has decreed will mark the boundary between those paying a new £140 standard rate of Vehicle Excise Duty (VED, or road tax between friends) and those paying an additional supplement of £310 for years two to six of ownership.

Years two to six? Indeed, because for the first year of ownership, the amount you’ll pay in VED will be linked to the CO2 emissions of your new car. However, the CO2 thresholds that determine what you pay have been dramatically revised compared to those of the present system.

Read our complete guide to 2017's road tax changes.

At the moment, no money at all is levied from those buying a car that emits less than 130g/km of CO2. From 1 April, the meaningful rate (£100) starts at just 76g/km and extends to £2000 for a car that breaches 255g/km – getting on for double the current M band for the heaviest polluters.

Are you still with me? Good. For some new car buyers, this new system will radically change the amount they pay.

Let’s take the new BMW 520d xDrive M Sport saloon for example: under the present system, you’d pay no tax on it in the first year and only £110 annually thereafter.

From 1 April, however, the BMW will command a first year VED payment of £160 then, for each of the ensuing five years, you’ll pay £450.

That’s only £50 per year shy of the annual amount currently being coughed up by the owner of a McLaren 570S. Fair? That’s a sticky one.

The powers that be would argue, not unjustifiably, that the current system, based squarely on CO2 emissions, has chiefly benefited those financially capable of buying increasingly efficient new cars while penalising those stuck in older models, which tend to emit more pollution and are therefore subjected to more tax.

By introducing a supplementary rate based on purchasing power, it can claim to be taxing only those who can afford it. Naturally, the underlying reason for the change to VED rates is less about fairness and more about ensuring the Treasury’s revenue stream.

Why has the threshold been set at £40k? Good question.

The government hasn’t revealed the reasoning behind its headline number, but it’s probably no coincidence that the vast majority of models that make up the UK’s top 10 best-sellers slide comfortably under it.

Nor does it seem entirely serendipitous that Porsche’s line-up starts at that price. Or at least it almost does. In fact, you can have an entry-level 295bhp Cayman with a manual gearbox for £39,878, but here we arrive at the rub: because the supplementary rate is charged on the list price with cost options attached, even the lightest smattering of chargeable ticks (for essentials like metallic paint and the locking rear diff with PASM) will have you forking out an additional £310 on top of your £140 standard rate in years two to six.

In some cases, it is a spectacularly fine line. You can have a BMW 330d xDrive Luxury saloon, but you can’t have the Touring model. You can have a Land Rover Discovery Sport HSE 2.0-litre TD4 automatic, but only in Fuji white.

You can have an Audi TTS with a manual ’box and everything as standard you’d really need, except the rear parking sensors required to stop you reversing into concrete bollards.

Of course, that’s right now. Manufacturers’ prices fluctuate marginally all the time and, come April, it’s hardly inconceivable that some may think it in their interest to make some popular models sneak under the magic £40k threshold.

Until then, there are two courses of action.

One – and car companies are certainly anticipating this – is to buy this month and (in some cases) save yourself some significant money. Bought in March, the new Porsche 911 GTS will cost £650 in VED in the first year and £295 annually from then on. Register it in April and it’ll be £1200 followed by £450 for the ensuing half a decade.

Your second course of action is to wait. If your fantasy driveway filler costs less than £40k already, you should consider this.

The most grin-worthy example has to be the V8-powered Ford Mustang. Right now you’ll pay £1120 in the first year and £515 annually thereafter. As of 1 April, you’ll pay £2000 followed by £140 per year.

The latter is the same a Toyota Prius owner will be paying. Granted, you’ll be stung for that £880 rise in the first year, but so significant is the annual saving that you’ll have recouped it in a little over two years of ownership – and, in that time, you get to cruise about in a proper, right-hand-drive, rear-driven, manually geared, unapologetically large muscle car.

No, it doesn’t do 40mpg. Or even 30mpg. On the A303 for three hours, it managed 26mpg in our hands. But who’s to complain when the gallons gargle away so eloquently?

The West Country’s main artery might actually be the perfect UK road for the Mustang. The road’s weird, capricious meander periodically evokes the sweeping scale of the interstate.

Drive a 410bhp European horizon-chaser along it and it’ll repeatedly strain against the 60mph leash. Ford’s funship, though, settles into an unworried groove, gently bubbling atop its suspension travel as it barrels forward.

Pushing the pedals and pulling at the cue-ball gearlever is portentous work. The steering is as dull as a 9lb sledgehammer. The car doesn’t even seem fast. The 5.0-litre V8 works like the bellows of a great forge: inhaling and exhaling, sucking and squeezing and banging and blowing in bookchapter-long ratios.

There’s no neck snap as you push on past caravans and Polish lorries, only a weightless sort of headiness as your barrel tumbles over the falls. Cast an eye downward at this point, though, to the green glow of your ‘ground speed’ and you’ll find yourself thundering incredulously toward a magistrate’s extreme displeasure.

It’s a tongue-out great shaggy mongrel of a car, then; not for everyone and not precisely perfect, either. But it’s the quintessential antidote to driving torpor and, even with £2k worth of optional extras, costs just £37,925.

Alternatively, you could funnel the money in the Continent’s direction and buy Germany’s idea of a fourseat hot rod. Handing nearly £40k to Audi is as unimaginative as betting on a fixed fight, but the returns are similarly guaranteed: where the Mustang feels fit inside for driving you to the shops two towns over, the S3 saloon has the sort of cabin you’d hope to be sealed in should you find yourself blasting off to Mars.

Truth be told, we’ve brought the car to Exmoor as a stand-in for the new Volkswagen Golf R, the model with which it shares a powertain. However, that doesn’t prevent Audi’s Q-car saloon from working its own peculiar charm.

Naturally, with quattro-branded all-wheel drive and a 306bhp 2.0-litre engine, it’s fast. Fast in precisely the way the Ford isn’t. Irrevocably fast. It is like this because the turbocharged four-pot, although sounding disappointingly distant after a V8’s throb, is as immediate and as forthright as a Pete Sampras serve.

It zings. And because it is wedded to the S tronic automatic ’box, it excels at propelling you mindlessly forward.

On the B-roads spanning Exmoor proper, should you feel minded to try among the crests and dips and blind bends, the Mustang driver (saddled with winter rubber in the case of our test car) wouldn’t see where you went.

I rather like the S3. As with the Ford, it feels like a lot of car for the £35,405 you’d pay for one equipped with the preferable manual gearbox. It’s a price that leaves plenty of wiggle room to add metallic paint and parking sensors and even the Virtual Cockpit infotainment system with three years of 4G internet access without troubling the £40k mark.

Also, in contrast to the Mustang’s climate-warming 299g/km, the S3 we drove emits just 151g/km, making its first-year tax obligation a more bearable £500 – and you’d probably manage 35mpg from its 43.5mpg combined claim.

If ecological reasoning or running cost efficiency are primary concerns, then there are plenty more sensible places to invest – and that, too, is a good thing because the new VED rules do tend to hit drivers who were previously rewarded for their parsimony.

The BMW i3 – still our preferred electric city car option – is a perfect case in point. Buy it in its zero-emissions, battery-only format and the £4500 plug-in car grant will ensure that it’s still free across the board, attracting no showroom tax or subsequent annual charge.

Opt for the Range Extender version pictured, which adds the 647cc two-cylinder petrol engine-generator, and its measly 12g/km CO2 emissions will mean parting with a £140 standard rate after £10 in the first year.

Given that the introduction last year of a denser 33kWh (or 94Ah as BMW prefers) battery increased the standard i3’s range to around 120 miles – and assuming you’re buying electric in the classic ‘second car, urban runaround’ mould – the electric-only i3’s diddly-squat tax liability only reinforces the idea that it’s probably the one to pick.

The i3’s skinny, low-resistance tyres don’t particularly endear it to damp B-roads on Exmoor, but drop into the seaside town of Lynmouth and its supreme about-town usability, centred on its still eye-opening torque delivery and minuscule turning circle, is unmistakable.

The real attraction, though, is the sophisticated and inspired packaging, a highbudget conglomerate of carbonfibre reinforced plastic and exposed hemp fibres that casts you as a member of the bourgeoisie in some near-future mega-city.

What a shame, then, that the present hasn’t yet caught up to BMW’s conceptualising: even with its generator and 9.0-litre petrol tank to fall back on, the i3 still threatened to exhaust its range at inopportune moments during our time with it and it needed an additional hour to get back to London from the West Country because of broken motorway services charging points.

If £40k seems like a lot to pay for a vague sense of anxiety, our final realworld VED-beater plugs all the holes. The steep upward sales trajectory of the mainstream family-sized crossover will likely be untroubled by the rate change because most contenders are well within the £40k threshold.

We’ve picked the Volkswagen Tiguan here because (a) we’ve already awarded it four-and-a-half road test stars and (b) the SE L 4Motion model we drove back from Exmoor came equipped with the firm’s new 237bhp 2.0-litre twinturbodiesel engine.

Much like BMW’s 3.0-litre straight six is to the X3, the gutsy four-pot is the barbecue sauce to the Tiguan’s established rack of ribs – and because you can’t currently have an X3 xDrive30d SE for less than £40k, it’s about as likeably burly as a £140-standard-rate diesel SUV gets.

Predictably, the burliness remains under wraps while you’re in return leg A303 traffic, although you need only a whiff of space on the road to deeply appreciate the way 369lb ft is deployed.

The go-faster charm is all the more noticeable because this is the kind of scenario in which the standard 2.0-litre TDI lump – even in its more powerful 187bhp guise – suddenly shows the strain, getting louder and harsher but not notably more productive.

Consequently, rather than redefining the Tiguan’s appeal, the additional power slots seamlessly into the back of the driver’s mind as yet another ticked off facet, there for when it is needed.

Opting for the new 2.0 engine now over the equivalent front-drive 148bhp variant would mean paying an additional £100 a year in tax, having already summoned up £300 extra at the showroom.

Wait a month and it’ll be £340 more initially, then the same £140 a year for being happier, earlier, smarter, safer and better energised. And with Her Majesty’s Revenue and Customs to thank.

Our Verdict

Ford Mustang V8 Fastback

The Ford Mustang is available in the UK in right-hand drive for the first time, but does the rest of this American muscle car fit the UK car scene?

Join the debate

Comments
26

11 March 2017
Ill thought out by that idiot Osborne ,along with stamp duty stifling transactions ,I am sure Brexit will be blamed again.Why Blackrock would pay some incompetent person £13500 per day is beyond belief.

13 March 2017
Blame someone else, taxpayers insist.

11 March 2017
I can't see what the purpose is in replacing one complex ill thought out tax system with another, except perhaps raising a bit more revenue for the government. Why not be done with it and simply add a bit more tax to fuel, that really is the only fair system where taxation is directly related to road usage and driving style - and where petrol, diesel and electric vehicles can be clearly separated. One thing is certain though, the new system should not be a consideration for car choice; the sums involved are small in relation to the depreciation involved with most cars costing over £40k.

11 March 2017
Would you give up a source of fixed income and make it variable according to the whims of the economy?

11 March 2017
What an absolutely unfathomable, illogical, unwieldy bloody mess, especially taking into account the different systems in use depending on vehicle age. If there's anyone out there who can enlighten me as to any sound reasoning behind it, I would be most interested to read those comments.

Wide cars in a world of narrow.

11 March 2017
Taxation reacts: it doesn't predict. Oooo, look at all that lovely VED the government was losing when every man & his dog was getting a sub-120g/k car. So, now, under the new regime, everyone pays. Playing the 'buy now or later' game is just about playing with the margins. If anyone is within 10% of 'unaffordability' and wants to sleep at night, I suggest you buy what and how you want, when you want to and be honest with yourself on what you can really afford. I am, of course, an outmoded outlier on this one :-)

BertoniBertone

11 March 2017
But the following may help explain. George Osborne has been known for his habit of snorting coke, so perhaps this all made sense to him at the time while being off his head. Like others here I think the only fair VED system is one based on fuel used or simply a set fee for each car regardless of vehicle price/emmisions or engine size as we already pay VAT on fuel.

 Offence can only be taken not given- so give it back!

11 March 2017
Illogical it may be, but the fact remains, in the UK the motorist pays no where near enough in direct taxation for the use, upkeep and future investment in the road network. Too much is plundered from general taxation, which could be spent elsewhere. We're all quick to moan about issues but not so quick to stick our hands in our pockets.

11 March 2017
[quote=Marc]Illogical it may be, but the fact remains, in the UK the motorist pays no where near enough in direct taxation for the use, upkeep and future investment in the road network. Too much is plundered from general taxation, which could be spent elsewhere. We're all quick to moan about issues but not so quick to stick our hands in our pockets.[/quote] Re-read your reply and see where you have gone wrong. We have been taxed more than enough over the years though Road tax in its forms and duty on fuel. Too much of that tax has gone on greasing Politician lives and an out of control welfare system. Motorists have long been a cash cow for the government.

11 March 2017
[quote=Wooshy][quote=Marc]Illogical it may be, but the fact remains, in the UK the motorist pays no where near enough in direct taxation for the use, upkeep and future investment in the road network. Too much is plundered from general taxation, which could be spent elsewhere. We're all quick to moan about issues but not so quick to stick our hands in our pockets.[/quote] Re-read your reply and see where you have gone wrong. We have been taxed more than enough over the years though Road tax in its forms and duty on fuel. Too much of that tax has gone on greasing Politician lives and an out of control welfare system. Motorists have long been a cash cow for the government.[/quote] Complete bollocks. The welfare system in the UK is a completely different issue, and you should be grateful it's there, you never know when YOU may need it. Motorists get off very lightly in what is directly charged to vehicle users and what the costs are to actually maintain and invest in the road network system. Everyone should pay, as everyone gets some benefit whether they drive or not, but the actual road users, the ones doing the damage, the ones creating the congestion simply do not pay enough. Too much bullshit is spouted out about taxation based on environmental damage, when the amount one uses the roads should dictate how much one pays.

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