11 Apr 2010

UK car taxation/costs (part 1 - tax)

I thought it might be interesting to have a look at the cost of the UK's car-related taxation, and see the benefits of going for high effiecency cars.

I took two typical small cars: a Peugeot 107 Urban and a Ford Fiesta 1.4 Studio.

Peugeot 107 1.0 Urban 3-door
MPG 62
Insurance Grp 1
CO2 Emissions 106g/km
Road Tax Band B
Price £8,470*

Ford Fiesta 1.4 Studio
MPG 49
Insurance Grp 4
CO2 Emissions 133g/km
Road Tax Band E
Price £13,395*

*prices taken from their respective main website.

It is probably clear from the differing list price that the two might not be directly comparable in terms of quality, but it is still interesting to see what the effect of the extra fule efficency of the Peugeot has on cost.

The extra efficency will obviously give some saving on petrol costs. Currently main road fuels (i.e. unleaded petrol and diesel) have a fuel duty tax which is paid per litre. As of 01-Apr-2010 this was £0.5719/litre. VAT is then added ontop of the fuel and fuel duty cost.

Today (11-Apr-2010) my local supermarket was selling unleaded petrol at £1.18/litre (£0.18 VAT, £0.57 Fuel Duty, £0.43 Fuel).

In addition to the savings on fuel, there will be a saving on the annual Road Tax.

To further promote the purchase of fuel efficent cars, there is a further first year road tax incentive. Any car with CO2 emission of 130g/km or less gets the first year of road tax for free.

So with a few simply assumptions I have calculated the amount of tax paid over a 5 year period for both cars:

Peugeot 107 Ford Fiesta 1.4
VAT £1,261.49 £1,995.00
Road Tax Yr 1 £0.00 £110.00
Road Tax Yr 2 £20.00 £110.00
Road Tax Yr 3 £20.00 £110.00
Road Tax Yr 4 £20.00 £110.00
Road Tax Yr 5 £20.00 £110.00
Fuel VAT Yr 1 £127.42 £163.05
Fuel VAT Yr 2 £129.58 £165.81
Fuel VAT Yr 3 £129.58 £165.81
Fuel VAT Yr 4 £129.58 £165.81
Fuel VAT Yr 5 £129.58 £165.81
Fuel Duty Yr 1 £414.65 £530.58
Fuel Duty Yr 2 £427.41 £546.91
Fuel Duty Yr 3 £427.41 £546.91
Fuel Duty Yr 4 £427.41 £546.91
Fuel Duty Yr 5 £427.41 £546.91

Total Tax Paid £4,111.53 £6,089.52

I have assumed each car does 10,000 miles per year. I have kept the fuel price the same each year, but for years 2 to 5 I have factored in the annouced increase of fuel duty to £0.5895/litre which occurs on 01-Jan-2011.

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