What Is A Showroom Tax?

Whether it’s just ‘window shopping’ to sample the latest deals, or something more planned and purposeful, spring is usually the peak season for drivers visiting motor trade forecourts. For some, that initial showroom experience may prove so alluring that it soon leads on to an extended test drive on trade plates, and maybe even an acquisition – followed by a call to your insurance broker with new details to update your private or motor trade insurance policy.

However, as the RAC are now reminding motorists, those in pursuit of this year’s crop of new and used cars will need to factor in the most recent car tax rises (from 01 April) and maybe a new and perhaps unfamiliar costing – a showroom tax.

What’s a showroom tax?
All UK drivers will be faced with new car tax rates which come into effect on 01 April, 2022. These latest VED (Vehicle Excise Duty) increases will add a further £10 to £30 per year to the cost of running your car at the very time when the average motorist is sure to be struggling with many other cost-of-living increases.

It will surely be cold comfort to know the DVLA (Driver and Vehicle Licensing Agency) reports that the rise is fully aligned with the very latest RPI (Retail Price Index) figures.

This rise in ‘road tax’ is part of the government’s drive to persuade buyers of new and used cars to purchase zero- and low-emission vehicles. How much you’ll now pay under the new rates is listed on the DVLA website and will depend on: what type of car you drive, when it was first registered, and what payment method you choose.

But spare a thought for those opting to buy a brand-new vehicle, who may now be charged as much as £120 extra to cover the VED charge for their vehicle’s first year on the road.

The “polluter” pays
The car tax system now rewards drivers who choose to buy what is perceived to be a ‘green’ or less-polluting vehicle by reducing, or even eliminating, the burden of road tax.

So those choosing a car with a low-emission rating can expect a fairly low first year charge, while those driving a ‘gas-guzzling’ car with a high-emission rating will be hit with a costly initial road-tax bill and are sure to be targeted with well above average charges well into the future.

Any showroom tax charges must be settled in a single payment and cover the first 12 months – after that, standard VED rates will apply.

Showroom tax in operation
Electric vehicles with zero emissions will, of course, not pay showroom tax under current legislation, but the same can apply to other low-emission vehicles. The Skoda Octavia vRS petrol plug-in hybrid (emissions: 26 g/km) for instance, will also have a first-year tax rate of £0, as will a Volvo XC40 (emissions: 47 g/km) which is another petrol plug-in hybrid.

Meanwhile, the Toyota Yaris Hybrid petrol hybrid (emissions: 98 g/km) misses out on the zero showroom tax ceiling of 50 g/km of CO2 and thus attracts a first-year tax payment of £130.

But big heavy SUV-type roadsters with powerful engines will always pay the most road tax: The VW Touareg 231PS diesel (emissions: 214 g/km), for example, will now cost £1,420 in tax to put on the road and before the cost of your insurance policy, while its mighty cousin, the 340PS 3.0-litre petrol will set you back a staggering £2015 before you can drive it away.