How Will the VAT Rise Affect on Cars
You already pay a value-added tax, or VAT, when you purchase new cars or used cars today, but get ready to pay even more. Why? The value-added tax is going to go up when you buy a car, beginning 4 January last year. At that time, the VAT will go up from its current rate of 21.0 to its new rate of 15%, effective on that date.
Every car purchase is affected
It doesn’t matter whether you buy used or new cars. Regardless, you’ll pay the value-added tax increase. However, this generally applies only to cars purchased through dealers. If you buy used cars privately, you likely won’t pay a value-added tax. Most private sellers are registered to receive the value-added tax.
Luxury cars will see bigger price surges
Although cars that are not efficient with fuel, like the Range Rover SUV, or other luxury cars, go see a bigger price increase overall, the higher VAT price happens because the cars themselves cost more to begin with than do more efficient family cars. Cars that are more fuel-efficient, “family-friendly” cars will see VAT price increases by about £400 beginning in January last year.
Is there anyone who is not affected by the VAT increase?
Although the value-added tax is going to go up for both new and used cars regardless, certain people may not have to pay value-added tax on car purchases; they will be exempt from paying the VAT.
For example, people who are disabled and who use their cars solely for personal use and not for business use may qualify to be exempt from paying a value-added tax on that particular car. Not everyone will qualify for the VAT exemption; those who may qualify should contact HMRC to inquire about VAT relief.
Is there a way to avoid the VAT increase?
As stated previously, those who buy used cars privately will also be likely not to have to pay the increased VAT, since most private sellers are not registered to receive the VAT. Nonetheless, unless you meet the previous criteria of being a disabled citizen who uses his or her car only for personal use, you’ll need to pay the VAT increase on purchases, assuming you get them through a dealer.
If you are disabled and you may qualify to be exempt from the VAT when you buy a car, don’t simply assume that you don’t have to pay. Contact HMRC first to inquire about receiving VAT relief or exemption before you buy.