Since April 1st 2017, anyone considering the purchase of a new car may be subject to a tax hike of hundreds of pounds a year. The new car tax legislation will mean that only the ultra-green zero-emissions cars with a price tag of under £40,000 will be tax free. This won’t affect cars already on the road.
According to SMMT (Society of Motor Manufacturers and Traders) the effect of this change has meant that March sales figures saw a record high. The UK new car market rose by 8.4% to become the biggest ever month for the sector – 562,337 new cars were registered.
In spite of consumers and businesses bringing forward purchases to avoid new VED charges the industry feeling overall, however, is that in 2017 as a whole, there will be a drop in new car sales year on year, due to a number of factors including the tax hike. There is also speculation that Brexit and a potential rise in interest rates could drive up the cost of finance. Distributors may also cut back on supply which in turn will result in a drop in the number of possible registrations.
Last month’s spike in car sales followed after one of the quietest Februarys in the last five years and this is not the only change to dramatically affect the motor industry in 2017. Another tax, dubbed the ‘toxin tax’ is rumoured to come into effect later this year and could continue to rock the industry. It is reportedly pushing many to sell their diesel vehicles which could in turn see the cost of second hand cars go down as supply outweighs demand.