Tax lump sum savings revealed – but can hard-pressed drivers afford to do it?
Cash strapped UK motorists could save money this year if they are able to pay their annual vehicle excise duty (VED) tax in one single 12-month payment.
The experts at LeaseElectricCar.co.uk have looked at the VED tax rates in recent years and found a lump sum could have saved some car drivers £44 over three years that figures were available.
They compared figures from 2018-9, 2020 and 2021, to see what drivers needed to pay for standard rate tax in their second year onwards for a petrol and diesel car. There are different tax rates for brand new cars and older cars.
All eyes will be on forthcoming Budgets to see if there will be further raises in VED tax charges – meaning further financial pressure on motorists in the future.
A spokesman for LeaseElectricCar.co.uk said: “Based on the current year’s figures, people could save around £15 by paying their VED tax in one go. It might not sound a lot,but accumulated over several years and the figure becomes even more substantial.
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“The key debate is whether people who are finding their household budgets squeezed are able to find the money to pay their VED tax once a year, but if they are able to, then savings can be made.”
There are many caveats to what VED tax motorists must pay in the UK, based on the type of vehicle and its age, as well as whether it is seen as a polluting vehicle or kinder to the environment.
But the calculations by LeaseElectricCar.co.uk are based on the scenario facing many drivers who fall into the category of having a smaller car that is not new, and which is petrol or diesel, and require a secondary, standard rate of tax.
From April 2021, the standard rate of secondary tax was £155 for 12 months, and £85.25 for six months. The latter figure must be doubled to £170.50 for a full year – an extra £15.50 a year. Motorists can soften the cost with 12 month direct debits of £162.75 – but still lose £7.75 a year.
From April 2020, the standard rate of secondary tax was £150 for 12 months, and £82.50 for six months. The latter figure must be doubled to £165 for a full year – an extra £15 a year. Motorists were able to pay with 12 month direct debits of £157.50 – but still lose £7.50 a year.
Figures published in 2019 showed the standard rate of secondary tax was £140 for 12 months, and £77 for six months. Doubling the latter to £154 a year for two instalments – an extra £14 a year. Motorists were able to pay with a 12 month direct debit of £147 – but still lose £7 a year.
The total saved from these three examples would be £44.50 if drivers were able to pay their VED tax in this banding in one go – the challenge facing people is whether they have the available capital to be able to do this as other living costs continue to rise.