VED Retrospective

There has been great discussion in the press about the retrospective nature of the new VED rates but what does that really mean? The increase in tax depends not only on the band your car is in but how old it is.

If, in 2010, you had the biggest gas guzzler (producer of CO2 g/Km) then you would have to pay £445 (that is £419 in today’s money). If the car was four years old then that would be an increase of 2% in real terms each year over today’s rates – not much of a shock then.

However, if your gas guzzler car were over four but under ten years old in March 2010 then you would still have to pay £445 but then that would be an increase of 73% in real terms each year over today’s rates – a real stinger.

With a car over ten years old you would be paying £200 in 2010 a real increase of 1% per year – not noticeable.

As ever, the government was slow to introduce banding and has brought them in too fast. Had the introduction been gentle the same effect could have been achieved with lower taxes and the retrospective nature would have caused less alarm. Incidentally, the previous band changes were not retrospective.

I am told that the increase in rates will have dramatic effects on the lease market “residuals” because fleet mangers look at whole life costs and are more sensitive to VED rates than retail customers – we’ll see.