Should the 'luxury car tax' threshold be raised?

[HangTime]

I was thinking, the 'luxury car tax' i.e. additional VED that is paying for vehicles costing over £40k has been place over 5 years now. Inflation is running at 10% and new car prices are getting hiked a lot over the past year or so.
The impact of this is that more and more cars are getting dragged into this bracket, especially at higher trim levels.

Should this threshold be raised in a similar was to how income tax thresholds often rise?

You might be thinking "lol, anyone paying £40k for a motor is loaded innit, they can afford the tax bro" but keep in mind the surcharge remains for 5 years. So say you never spend £40k on a car, but you might buy a used car that is a couple of years old for less that had an original list price of £40k. And you've then got a tax surcharge of over £350/year to deal with on top of the elevated used car prices.

I don't actually have a strong opinion either way, we need to collect taxes somehow but it's just another factor that makes window shopping for cars these days even more unpalatable, there's nothing that looks like a good deal any more.

 

[sigma]

No

 

[Joeyuk]

£40k is a good limit, we can’t cut taxes everywhere. I didn’t know about the 5 year thing but guess it makes sense.

 

[Semple]

Standard stealth tax.

 

[paradigm]

£40k is a good limit, we can’t cut taxes everywhere. I didn’t know about the 5 year thing but guess it makes sense.

Not really. The first owner typically had the car until the end of its warranty period, or thereabouts. Why should I, as someone buying a £22k car at 3 years old, continue paying for the privilege of somebody else enjoying the car from new? I’ve been paying the additional rate on my BMW 440i for 3 years now (in the final year of the additional rate), even though I bought it used for £20k~ under the threshold.

On the flip side, I currently pay £0 tax for my Tesla Model 3 Performance that I paid £20k~ MORE than the threshold for.

It logically makes no sense.

What would make more sense is a scaling tax, much like income tax. Pay an additional rate, sure, but someone buying a £40,001 vehicle would pay far less additional rate than someone buying a £250,000 car.

 

[Spleen Sauce]

I’ve no problem with it for brand new cars, but the 5 year tax premium for used cars is what really does it for me and should be changed. We’re still paying the additional rate on my wife’s 320i - which we paid under £30k for used. It’s now worth low to mid twenties yet the tax rate makes it far less attractive a proposition to buy currently I think.

 

[a1ex2001]

It’s a tricky one car ownership in the UK is still far to high to be ecologically sustainable and the only real way to reduce it is to make the cost unbearable the rise in car ownership in the last 40 years is a result of it being a cheap option taxes like this go some way to redressing this balance even if they are crewed and not particularly well thought through.

A bit like the cost of buying cars being high don’t expect that or the cost of ownership to be going down anytime soon if the government wants to get anywhere near it’s carbon neutral goal we don’t just need to switch to electric cars we need to reduce car use significantly as well.

 

[Stu999]

It shouldn't exist at all. However, as a country we don't do sensible things like infrastructure investments (at a time of historically low borrowing costs) to make alternatives to the car more appealing.

 

[peterwalkley]

I can't see this being changed for a while and I suspect the trigger for change would be that the tax take for VED has dropped so much that the exemptions and reduced rates for EV's are costing the treasury too much in lost revenue.

We're a two car household, but both are barely used. We could survive on one and even more so when child taxi duties are no longer needed.

 

[OspreyO]

Someone buying a £40,001 vehicle would pay far less additional rate than someone buying a £250,000

Far fewer few people paying tax would dramatically reduce the tax revenue and there isn't enough people paying the higher tax to balance it out.

New car prices rise five times faster than UK wages

Research reveals the highs and lows of new car costs.

www.dailyrecord.co.uk

 

[OspreyO]

I can't see this being changed for a while and I suspect the trigger for change would be that the tax take for VED has dropped so much that the exemptions and reduced rates for EV's are costing the treasury too much in lost revenue.

We're a two car household, but both are barely used. We could survive on one and even more so when child taxi duties are no longer needed.

You should be rewarded for less car use. But people are being penalized for car ownership not emissions. I guess there some merit in that also.

But if someone can have less running costs on a more 2 ton new hybrid or ev thats not right either.

 

[[TW]Fox]

I’ve no problem with it for brand new cars, but the 5 year tax premium for used cars is what really does it for me and should be changed. We’re still paying the additional rate on my wife’s 320i - which we paid under £30k for used. It’s now worth low to mid twenties yet the tax rate makes it far less attractive a proposition to buy currently I think.

The most annoying thing is that you're probably only paying it because the first owner added a sunroof or something as the list price of the 320i was under 40k.

 

[Spleen Sauce]

The most annoying thing is that you're probably only paying it because the first owner added a sunroof or something as the list price of the 320i was under 40k.

It’s got Pro, Tech and Comfort packs which I think pushed it over the threshold by a couple of grand. But it’s still frustrating nevertheless!

 

[Mekrel]

I think it should be raised in line with inflation in my opinion, £40k doesn't have the same purchasing power as it did previously. Utilities such as phone, broadband and Sky contacts, and government loans such as HTB are linked to CPI inflation.

 

[theone8181]

Was just thinking what is the world coming too if a 320d is 40k. A fairer way would be for it to be 5 years or just the first owner, so buying a used one had no extra charge.

 

[muon]

I don't agree with the supplement increasing with inflation when the threshold isn't.

I believe it started off at £310 (x5=£1550) and is now £355 (x5=£1775). So as a percentage tax it is increasing.

Eventually it will be a really high percentage on a 40k vehicle. The people buying an 80k vehicle are less affected, which makes it a regressive tax.

 

[Stu999]

Was just thinking what is the world coming too if a 320d is 40k. A fairer way would be for it to be 5 years or just the first owner, so buying a used one had no extra charge.

Too easy to dodge? Dealer pre-registers and therefore no extra tax on your “nearly new” car?

 

[[TW]Fox]

I don't agree with the supplement increasing with inflation when the threshold isn't.

I believe it started off at £310 (x5=£1550) and is now £355 (x5=£1775). So as a percentage tax it is increasing.

Eventually it will be a really high percentage on a 40k vehicle. The people buying an 80k vehicle are less affected, which makes it a regressive tax.

If they really wanted to link excise duty to vehicle list price they should have just made it a percentage of the list price each year.

Then people who buy a £200,000 Ferrari will pay more tax than somebody who bought a £40,001 Volkswagen Tiguan with optional cycle carrier.

 

[muon]

If they really wanted to link excise duty to vehicle list price they should have just made it a percentage of the list price each year.

Then people who buy a £200,000 Ferrari will pay more tax than somebody who bought a £40,001 Volkswagen Tiguan with optional cycle carrier.

I'm guessing they didn't do that as it would be even more confusing for second hand buyers and possibly more difficult to administer.

However, I don't understand how they can justify the inflationary increases. It will go up another 10% in March.

 

[sandys]

I think there should be no exceptions like EVs to the tax and the tax should move with inflation each year(as should any tax with fixed value limits) and be percentage based, but one off at point of sale.