Paschal Donohoe, Minister for Finance, delivered his speech today summarising Budget 2021 for Ireland. As expected, it included in it significant change to motor taxation and costs.
Motor tax system changes
Before today, two disparate motor tax systems existed (read our Motor Road Tax Prices in Ireland Explained feature for more details), pre-2008 tax determined according to engine size and post-2008 tax determined by a car's CO2 emissions rating. There will be no changes to the pre-2008 system, while only the 'most polluting' cars in the post-2008 group will be slapped with higher rates of tax from the 1st of January 2021. This applies only to cars that have CO2 emissions ratings of higher than 141g/km (the current Band C) and is summarised below:
Band C: 141 to 155g/km: €400 (was €390)
Band D: 156 to 170g/km: €600 (was €570)
Band E: 171 to 190g/km: €790 (was €750)
Band F: 191 to 225g/km: €1,250 (was €1,200)
Band G: 226g/km and up: €2,400 (was €2,350)
On January 1st, 2021, Revenue will introduce a third motor tax system to take into account the altered CO2 figures due to use of the newer WLTP testing results. Cleaner and more efficient vehicles will be taxed lower, encouraging buyers of new cars to favour them. The new motor tax bands are as follows:
0g/km: - €120 per annum
1 - 50g/km: €140 per annum
51 - 80g/km: €150 per annum
81 - 90g/km: €160 per annum
91 - 100g/km: €170 per annum
101 - 110g/km: €180 per annum
111 - 120g/km: €190 per annum
121 - 130g/km: €200 per annum
131 - 140g/km: €210 per annum
141 - 150g/km: €270 per annum
151 - 160g/km: €280 per annum
161 - 170g/km: €420 per annum
171 - 190g/km: €600 per annum
191 - 200g/km: €790 per annum
201 - 225g/km: €1,250 per annum
greater than 225g/km: €2,400 per annum
Big VRT and NOx levy shake-up
The motor industry had lobbied to have VRT (Vehicle Registration Tax - see our How Much VRT is Paid in Ireland? feature for more details) reduced, in a bid to encourage the purchase of more new cars, which are ostensibly more efficient and cleaner than old. This was not adopted by the government, and instead it has created a new set of VRT bands and costs, again with a view to encouraging buyers of new cars to go for cleaner and more efficient models. Here are the new VRT tax bands (OMSP is Open Market Selling Price as determined by Revenue):
Band 1: 0 - 50g/km - 7% of OMSP
Band 2: 51 - 80g/km - 9% of OMSP
Band 3: 81 - 85g/km - 9.75% of OMSP
Band 4: 86 - 90g/km - 10.5% of OMSP
Band 5: 91 - 95g/km - 11.25% of OMSP
Band 6: 96 - 100g/km - 12% of OMSP
Band 7: 101 - 105g/km - 12.75% of OMSP
Band 8: 106 - 110g/km - 13.5% of OMSP
Band 9: 111 - 115g/km - 14.25% of OMSP
Band 10: 116 - 120g/km - 15% of OMSP
Band 11: 121 - 125g/km - 15.75% of OMSP
Band 12: 126 - 130g/km - 16.5% of OMSP
Band 13: 131 - 135g/km - 17.25% of OMSP
Band 14: 136 - 140g/km - 18% of OMSP
Band 15: 141 - 145g/km - 19.5% of OMSP
Band 16: 146 - 150g/km - 21% of OMSP
Band 17: 151 - 155g/km - 23.5% of OMSP
Band 18: 156 - 170g/km - 26% of OMSP
Band 19: 171 - 190g/km - 31% of OMSP
Band 20: greater than 191g/km - 37% of OMSP
Although diesel cars generally emit less CO2 than their petrol-powered equivalents, that advantage is offset by changes to the NOx levy system, which are to the detriment of the cost of new diesel cars.
To level the playing field somewhat, the official CO2 rating of used cars being imported will be 'uplifted' to WLTP levels. The government has devised a formula for this, depending on whether the car is petrol or diesel.
Unfortunately, VRT rebates currently in place for plug-in hybrids will be phased out at the end of this year, though the Minister stated that the new VRT bands should balance that out. At the same time, the €5,000 VRT rebate for electric cars is changing for those with an OMSP (Open Market Selling Price) of over €40,000. It will reduce in a tapered fashion to zero rebate for buyers of electric cars with an OMSP of over €50,000.
Increased carbon tax added to fuel now
In line with plans to mitigate climate change, carbon tax is increasing from €26 per tonne of CO2 to €33.50 per tonne. That means an increase in petrol and diesel price at the pumps by a few cents per litre, applying from midnight tonight.