TAXING YOUR CLASSIC CAR NEEDN'T BE TAXING

Pretty-much every small-ad for a classic seems to reference its 'cheap tax' or 'tax-free status', but sometimes it's not as clear-cut as it seems. With new rules stipulating that tax cannot be transferred with the car, it's a good time to remind yourself of how much you'll be expected to pay when you buy your next classic, given that you'll have to sort out the tax when you pick up the car regardless of when the last owner taxed it.

In every case it's possible to pay either a one-off annual lump sum, two payments every six months, or a monthly direct-debit. The tax you're eligible for varies depending on when your car was built, and its engine characteristics. Let's break these down by date:

 

40-year rolling exemption (currently pre- 1 January 1975)

If your car is over 40 years old, then it's tax-exempt. You'll still need to fill in the tax form on the gov.uk/vehicle-tax website, but you won't have to pay anything.

 

Engine size-based taxation (currently 1975-28 February 2001)

For cars built between the 40-year exemption cutoff and March 1 2001 – up to but not including Y-prefix registrations – tax rates are calculated based on displacement. There are only two bands – below and above 1549cc – and these rates are currently £145 per year for the small-engined cars, £230 for larger ones. 

 

First wave of CO2 emission-based taxation (1 March 2001-23 March 2006)

The tax structure was switched to an emissions-based system in 2001 with 11 separate bands, and revised in 2006. Although it sounds initially as though it has the implication to add hundreds of pounds to the annual running costs of 'dirtier' old performance cars, it's worth pointing out that the highest 2001-6 band – K – for cars emitting in excess of 201kg of Co2 per kilometre, is currently £280 per year. This is just £50 higher than the top rate for the largest of 1975-2001 engines. In reality, given that manufacturers did their best to avoid lumbering their customers with excessive levels of taxation, most motorists ended up paying less under the new regime. Any car emitting less than 150g/km – the vast majority including several high-performance cars – incurs a lower tax bill than an old sub-1549cc engine.

 

Second wave of CO2 emission-based taxation (23 March 2006-date)

In 2006, following an EU directive encouraging cleaner engines, two additional tax bands were added for the most heavily-polluting vehicles, with rates at almost double those of Band K. Cars generating between 226 and 255g/km are now eligible for £480 tax per year, and anything in excess of 255 incurs an eye-watering annual £495 bill. 

Although many of the cars affected are rare supercars, where high running costs are expected and strong residual values effectively restrict ownership to the well-heeled anyway; it's worth pointing out that these tax rates have the potential to severely hamper the appeal of a whole generation of second-hand luxury cars and even some more affordable performance cars. Big V8 Jaguars, Mercedes, BMWs, Range Rovers and the like will all be eligible for the near-£500 annual charges, as will other, cheaper cars that derive their performance via sheer cubic inches, such as grey–import American muscle cars and Japanese beasts like the Nissan 370Z.

However, it is worth pointing out that the turbocharger - and its development in motor sport – is proving to be the saviour of the high–performance engine. By extracting more torque from smaller engines without increasing emissions, the addition of turbochargers and a trend for downsizing means that some of the world's fastest supercars are as 'clean' as the smallest superminis. As more manufacturers go down the forced-induction route, the more of us will avoid big-engined mega-tax. However, unfortunately some future classics will always fall foul of Bands L and M in a manner that may harm their value and usability as fun cars.

 

SORN and Direct Debit – the saviour of thirsty classics?

If you're taking a car off the road for a period of time, be it for restoration or to protect it over winter, you can get a Statutory Off-Road Notification (SORN), which will ensure it won't incur a tax bill while it's not being used. Go to gov.uk or your local post office and fill in a V890 form, which will register the vehicle as not currently in use. By keeping the car on a SORN, then setting up your road tax on a monthly direct-debit basis when it is being used, you can minimise your tax bill and effectively pay as you drive.

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