Showroom Tax Stings New Car Buyers

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Thu, 08 Apr 2010

Car buyers across the UK have been hit by increased costs with the launch of a new government tax on new cars .

The so-called 'showroom' tax came into effect at the start of the month and applies to anyone buying a brand new motor – cars registered from April 1.

The tax is a one-off charge for first-year of ownership that must be paid in addition to the usual vehicle excise duty (VED) rate, or road tax as it's more commonly known.

The tax is designed to penalise high carbon dioxide-emitting cars and encourage ownership of greener models. As a result, this additional charge does not apply to owners of cars in Bands A-G (up to 165g/km CO2).

However, owners of new vehicles in Band H (166 to 175g/km CO2) must pay a first year showroom tax rate of £70, increasing to £100 for cars in Band I (176 to 185g/km CO2), £190 for Band J (186 to 200g/km CO2), £305 for Band K (201 to 225g/km CO2) and £325 for cars in Band L (226 to 255g/km CO2).

The highest first year rate applies to cars that fall into the Band M category - those that emit more than 255g/km of CO2. The showroom tax rate for such cars is £515, but the total first year cost for owners is £950 due to this year’s increased VED rate of £435.

The showroom tax is expected to raise £735 million in its first year of operation.