Car tax and the 2006 Budget (UK)

Words: Rob Bell
Acknowledgements: Nic Fasci and Iain Ross

This month (March, 2006) has seen the new car tax bands announced by the Chancellor of the Exchequer, Gordon Brown. Bless him - from what was once a nice, simple to understand single-rate tax system, we're now faced with no less than 22 different tax bands! How does your MG fit into the scheme of things?

The new tax system and Pre-2001 MGFs

Did you know?

Interestingly, even if the 1.6 litre MGF had been launched ahead of the arbitrary March 2001 cut off point, it would still be in the same taxation bracket at its larger-engined brethren - the actual capacity of the 1.6 litre is 1588cc!

Easiest to understand are MGFs built and registered prior to March 1st, 2001.

All MGFs built prior to this date were 1.8 litre models - and thus come into the over 1549cc taxation bracket - i.e. 175 per annum (price correct at the time of the 2006 budget). That represents a modest 5 per annum increase in the tax bill over the previous year for owners of early MGFs.

The new tax system and Post-2001 MGF and TFs

Thereafter, things get a good deal more complicated - as the cars now become banded according to exhaust emissions - principally CO2 - the most significant "green-house" gas emitted by internal combustion engines.

Since March, 2001, engines have been homologated to assess the CO2 output per kilometre travelled. Clearly, less economical cars will have a far higher CO2 rating (which is recorded as grams per kilometre g/km), and more economical vehicles, a lower CO2 rating. There are now 6 tax bands according to these emissions - with a seventh being added this year for heavily polluting vehicles (that happily, does not include any model in the MGTF range).

The ratings for all MGF and TF models are mentioned here, but effectively, there are just two tax-bands that effect the MGF/TF - bands E and F.

Summary of how MGF and MGTF models fit into the new tax bands

Tax Band Emissions - CO2 (g/km) Models effected
E 166-185 MGF 1.6i, MGF 1.8i
MGTF 1.6i, MGTF135*, MGTF 160
F 185-225 MGF1.8 Stepspeed, MGF 1.8VVC, MGF Trophy 160
MGTF 1.8 Stepspeed, MGTF135*

* MGTF135 may fall into either category E or F depending on when it was built. See below for more information

The Winners and the Losers

What does this tax banding mean financially? Tax band E vehicle owners can expect to pay 150 per annum - and are the clear winners from this year's budget - and effectively save 20 per year as a result. You can, if you wish, cash in your existing tax disc - you'll have about 160 pence per full calendar month remaining refunded - although whether this is worth the effort is up to you.

For owners of MGs now finding themselves in Tax band F, the new budget is bad news: this tax band costs 190 per annum - a painful increase of 20 over the previous year (by my calculations, that is a 12% increase).

But if you are a VVC owner, you will be 15 per annum better off if your car is an older (pre-2001) version - unless the VVC concerned is a TF160 model!

At present, it appears that converting your MG to LPG or other alternative fuels will not effect road tax - a situation that appears somewhat odd - and perhaps can be clarified with the DVLA in the future (it may be worth contacting your local DVLA centre and have further consultations regarding this if this is a route you are keen to pursue).

Curiously, there are some somewhat odd anomalies in the new scheme due to the cut off date between capacity-based tax and emissions-based tax. Here are a couple of illustrations. If you own an MGF1.8i, you will pay 25 more for your road tax if your car was registered before March, 2001, than if you owned effectively the same car but registered after this date. Conversely, if you are a VVC owner, you will be 15 per annum better off if your car is an older version - unless the VVC concerned is a TF160 model - which is 25 cheaper to keep on the road! Perhaps surprisingly, MGF Trophy 160 owners fall firmly in the higher taxation bracket - clearly, the MG Rover engineers worked hard to get the TF160 emissions so clean with the fully homologated engine.

If you are a second-hand car buyer interested in an MGF or TF, the tax-bracket information may help you decide which model is best suited to your needs and pocket. This can particularly apply to models where the CO2 homologation figure changed during the manufacturing run - particularly the TF135.

The Car Tax Band and the TF135

A copy of Iain's V5C, with the relevant sections highlighted by the red arrows (see text). Click on image to enlarge.

As indicated in the summary table above, not all MG TF135s are the same. At launch in 2002, the TF135 was homologated with a CO2 emissions rating of 189 g/km, which unfortunately for owners means band F. However, the MG Rover engineers continued to work on the car, and by the end of 2003, the TF135 was re-homologated with a CO2 rating of 184 g/km, bringing the car down into the now significantly cheaper band E.

If you own a TF135 it therefore becomes extremely important to check that the details on your registration document - the V5C - tally correctly with the CO2 emissions and tax band. Discussing this with one of MG Rover's former homologation engineers, Nic Fasci, it transpires that the vital information lies in your TF's version number. Early cars, with version numbers 01C, 01N, 02C or 02N are the ones with the higher emissions - 189 g/km - and thus fall into the higher group F tax bracket.

All later cars, versions 03x, 04x, 05x and 06x (where x is the letter 'C' or 'N'), were all homologated at 184 g/km, and thus fall into the lower group E tax bracket. Check your V5 now and ensure that you are not being over charged!

Where to look...

Iain Ross has very kindly scanned in his V5C document, showing the relevant page. On it are some crucial pieces of information about the model of your car that is relevant to the tax category it finds itself in. These are highlighted in the image opposite (click to enlarge). Section D2 provides information on the model, the variant and the version. In this example, we are looking at an MG TF. The variant type is *BK, which signifies that the model is a 135. The version is the information vital for determining the homologation - and in this case, it shows that Iain is lucky - his car is version 05C - and thus a model homologated at 184 g/km and therefore in the category E banding. This figure is confirmed in section V7 - the CO2 rating is shown correctly as 184 g/km.

What is the difference between cars?

A very good question - so I asked Nic Fasci this, and asked whether for the sake of a MEMS re-map an earlier car can be re-categorised as a later version. Predictably, the answer is no - here's what Nic told me...

Unfortunately it doesn't work like that. Each new version that is "launched" means that the whole vehicle approval document has been extended to include the latest revisions.

What this means is that the new version has new system approvals that have been extended to also take into account new build details, emissions results and so on - or in other words some of the 40 directives have changed thus taking the car a step further.

Because of this, the whole vehicle document means that a car has been built to a specific criteria and meets legislation. Simply taking the car to a dealer and flashing MEMS is not an option, there are other changes on the car that cannot be fitted retrospectively as it would change the car.

In the case of the 189/184g/km cars, there was probably a change to the emissions system such as the catalyst precious metal loadings and ECU calibration was changed to meet legislation, the Radio Suppression (EMC) may have changed and so on. It's not something that can be altered as the cars are built to the new level and it is reflected on the type approval numbers on the VIN plate and logged with the DVLA.

A mass write up would not be possible as there are other changes on the car that cannot take the car to the new level.

The bottom line is that if your TF135 is an early 01x or 02x version, you are stuck with the higher tax category - and therefore, 40 quid per annum worse off than the owner of effectively the same car, albeit one of the later build versions.

For more information...

For more information on the new tax system, look up the DVLA website - which also includes the emissions ratings of all cars currently on sale. Click here to enter.