Motor taxes and VRT rates to increase

 

Motorists face significant increases in running costs after today’s Budget, with increases in motor tax particularly hitting those who purchased low emissions cars in the last four years.

New car buyers are also hit with a rise in Vehicle Registration Tax (VRT), which will increase the prices of new cars and are likely to have a consequent rise in used car prices.

However, there will be no increase in excise duty on petrol or diesel.

The emissions-based tax band system for VRT and motor tax introduced for new cars sold after June 2008 has been revised, breaking the current two lowest bands into six. There are now 11 tax bands instead of seven.

The lowest band now applies only to cars with emissions between zero and 80g/km, carrying a VRT rate of 14 per cent and an annual motor tax rate of €120, which is actually €40 less than the current lowest rate. 

However, few cars qualify for this rate so the majority of motorists will face an increase in their annual tax.

For the rest of the cars that currently fall into tax bands A and B, they will incur an increase of between €10 and €55 a year from January 1st, depending on the emissions level. Cars with emissions in the higher bands – over 140g/km – will incur rises of between €45 and €92 a year.

Cars registered before July 1st, 2008, face a 7.5 per cent increase in motor tax.

The new bands also apply to VRT rates on new cars, hitting lower emission cars particularly strongly. While the top rate for big polluting cars remains at 36 per cent, those with emissions between 81g/km and 120g/km rise by between one and three per cent.

Taking a new Ford Focus 1.6 TDCi Edge, that could mean a jump of about €700 on a current price of €23,485.

While the increases hit those in the lowest bands particularly hard, the Government is determined to promote alternative energy vehicles. It has extended VRT reliefs currently in place for electric vehicles (up to €5,000), plug-in hybrid electric vehicles (up to €2,500), and hybrid and flexible fuel vehicles (up to €1,500) for a further 12 months to the end of December 2013.

During his speech, Minister for Finance Michael Noonan confirmed the much-anticipated change to the new car registration system. Instead of your new car being registered as a 13-D or 13-G for example, it will be a 131-D or 131-G if purchased before July, when a second registration period will begin, bringing in 132 plates.

The move overcomes fears within the motor trade that superstition might get the better of buyers next year, who would refrain from buying a new car with a 13 registration. It would also fulfil a long-held wish within the motor trade to even out the annual sales rush in the first quarter, where currently 80 per cent of new car sales occur.

Reacting to the budget changes Eddie Murphy, chairman and managing director of Ford Ireland said: “In the context of a very tough budget, we feel that the motorist has again been targeted for disproportionate extra cost.

“When you consider the spiralling cost of fuel and insurance, today’s increases in VRT and road tax are certainly unwelcome for motorists and are short sighted in our view. Of course, the per vehicle tax yield will increase but in the longer term, the measures will adversely affect car sales thus reducing the overall tax take from the motoring sector. A key requirement of the budget was to stimulate growth in the economy and unfortunately, these measures will have the opposite effect.”

Volkswagen Group Ireland managing director Simon Elliott said: “It is a shame that the motor business here in Ireland again appears to be seen as something of a cash cow and that the Government is again seeking to drain more revenue from the beleaguered motorist. While any increase in VRT and motor tax might worry consumers we must welcome the news that there will be a second registration plate in 2013. We also welcome the decision not to increase duty on petrol or diesel.”

Submit your budget queries to experts from The Irish Times and PwC who will  answer questions until noon on December 6th. 

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