New car prices set to rise for higher emission vehicles

New car prices are set to rise next year for higher emission cars. Tax rates for new cars with emissions over 110g/km are set to increase by between 1 per cent and 4 per cent. It means the top rate of vehicle registration tax (VRT) will be 41 per cent.

Changes to the VRT regime from January 1st will see a 1 per cent increase in the rates on cars with emissions between 111g/km and 130g/km; a 2 per cent rise for cars with emissions of 131g/km to 145g/km; and a 4 per cent rate increase for cars with emissions over 146g/km.

Motorists also face a rise in petrol and diesel prices from midnight due to carbon tax increases. A litre of diesel will rise by 2.5 cent – or €1.48 for the average full tank – while petrol goes up 2.1 cent or €1.28 on a full tank.

Home heating oil is also set to rise from May 1st next year, up by €19.40 for a 900-litre tank.

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Despite the Government's tax strategy group proposing changes to the tax rebates on fully electric vehicles, Minister for Finance Paschal Donohoe did not amend the €5,000 VRT rebate scheme and instead extended it until the end of 2023.

For company car drivers who opt for an electric vehicle, the 0 per cent rate of benefit-in-kind (BIK) tax has been extended until 2025, but is being tapered off from 2023. For BIK purposes the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.

Figures from the Department of Finance show the VRT changes are expected to bring in €82 million in extra annual tax revenue, while the carbon tax increases will add €102 million to the Exchequer's funds.

Reacting to the budget measures, AA Ireland head of communications Paddy Comyn said the increases in fuel prices would hit the lowest earning motorists hardest.

“Increases in the price of petrol and diesel were expected – but this is on the back of what is a 25 per cent increase in prices of petrol and diesel over the past 12 months,” he said. “Irish motorists are already paying around 60 per cent in tax at the pumps for their fuel.”

While he welcomed the decision to keep the VRT relief on electric cars in place, Mr Comyn said: “For some motorists moving into an EV is as yet too far a stretch, and they have no choice but to now pay more to get around as the public transport network remains imperfect, especially outside of the capital.”

Mixed bag

The Society of the Irish Motor Industry (Simi) described the budget as a “mixed bag for the motor industry and the motorist”.

Simi director general Brian Cooke said: “The increases in VRT on the back of Covid, Brexit, increased fuel taxes and the dramatic VRT changes in last year’s budget are hugely disappointing. These increases only add to the already heavy tax burden on new cars, and will serve to slow down the renewal of the fleet, acting as a barrier to reducing emissions.”

However, he welcomed the continued VRT relief for electric vehicles, saying it brings a degree of certainty to both consumers and the motor trade, helping to increase EV sales over the next two years.

He also said the 0 per cent BIK on EVs has proved a real success, and while its extension is positive “the tapering of this relief is too early, and should not commence until after 2025”.