Less than half (48%) of drivers are aware of April’s increase in first-year rates for Vehicle Excise Duty (VED) – despite facing potentially substantial increases.
As a result, drivers buying new cars this year might not fully understand the costs involved, meaning they could be choosing vehicles they can’t afford without realising it.
VED is the yearly tax on all vehicles that use public roads, and can vary depending on their car’s environmental impact and when it was first registered. Drivers who buy a brand new car usually have to pay an additional “first-year rate” for the first 12 months they own the vehicle.
First-year rates significantly increase from the start of April, with the cost of some tax bands doubling. This means drivers who buy a new car are likely to pay much more tax than they are used to.
According to the new research, an estimated 21.2 million drivers are unaware of the changes. If 2024 buying habits continue this year, drivers will buy almost 200,000 new cars without realising the extra tax involved. This is equivalent to an estimated £83.5 million in additional tax payments that drivers won’t have known about.
The statistics come from the latest research by Go.Compare car insurance. The comparison site says drivers who buy a new car between April and September will pay an average of £418 more tax than last year, although the increase could be in the thousands for some buyers.
Women displayed an especially low level of awareness of the change in the survey. Just over a third (39%) of women know about the VED increases, compared to 58% of men, indicating that women might be more likely to make this mistake.
Younger drivers are also less aware of the changes. Around one-quarter (24%) of drivers under 25 said they knew about the rises, compared to roughly a third (34%) of 25 to 34-year-olds, and half (49%) of 40 to 59-year-olds. Older motorists had the highest awareness, with nearly two-thirds (62%) of over 60s stating they knew about them.
The vast majority of drivers, 83%, also stated that they don’t know their car’s CO2 output – a key factor in determining its tax band. Women and younger drivers were also less likely to know this. Around a quarter (26%) of male drivers said they knew their car’s CO2 output, compared to 8% of women. Similarly, only 7% of drivers under 25 said they know this, compared to a fifth of 40 to 59-year-olds.
Tom Banks, car insurance expert at Go.Compare, said, “The increase in first-year rates for VED could mean a substantial tax rise for anyone who decides to buy a new car this year. It’s imperative that drivers are aware of this before they head to the showroom, or they could end up choosing a car that comes with a tax bill that they can’t afford.
“The increases apply to new cars and are based on CO2 output, so if you want to avoid them altogether, buy a ‘nearly new’ car that’s just a few years old instead. Or, if you’re set on a new vehicle, consider a low-emissions car, as that will place you in the cheaper tax bands.
“Otherwise, see if there are any other ways you can reduce your motoring spending to make up for the increased tax costs. For example, comparing car insurance policies might allow you to find a provider that offers the same level of cover for a lower price, and driving more economically could help to reduce your fuel costs.”
