Vehicle registration tax, motor tax and fuel and tobacco excise

Oct 13, 2020

The changes in vehicle registration tax (“VRT”) and motor tax and fuel are part of the Government’s Climate Action commitments and each aims to incentivise motorists to move away from higher polluting vehicles.   

VRT 

The reforms here have also been introduced in the context of the transition to the new Worldwide Light Test Procedure (“WLTP”) for emissions testing. 

From January 2021 a new expanded VRT table is being introduced to:    

  • use the CO2 values from the WLTP for emissions testing for passenger cars; and 

  • strengthen the environmental rationale of the VRT regime in line with Government commitments to radically reduce emissions from road transport and reform the VRT regime.     

The existing band table will be replaced with an expanded table and a revised rates structure. Current VRT rates range from 14 per cent to 36 per cent. Under the new table, VRT will range from 7 per cent to 37 per cent. The new table is set out on page 14 of Annex B to Budget 2021 Tax Policy Changes 

Overall, the existing 11 bands for VRT will be replaced with 20 VRT bands. The highest rate of VRT will apply to vehicles > 190g/km and will increase from 34 per cent to 37 per cent. For vehicles in the lowest emission category of 0-50g/km, VRT will be halved from 14 per cent to 7 per cent.     

Motor tax 

From 1 January 2021, a new motor tax category is being created for cars registering with a WLTP CO2 value.  

Cars first registered in the State up to 31 December 2020, or cars registering from January 2021 which only have a New European Driving Cycle (“NEDC”) emissions figure, will remain in the current motor tax table, which is increased slightly to reflect climate action priorities for vehicles in the above 140g/km tax band. The highest increase in the motor tax cost for cars in this category is €50 for the highest polluting cars (> 225g/km) tax band. 

Pre-2008 cars, which do not have CO2 emissions information, continue to be taxed according to engine size. These rates remain unchanged. 

From 2021, there will therefore be three motor tax tables in operation:   

1. The unchanged pre-July 2008 table based on engine size; 

2. Cars registered up to 31 December 2020 and those registered from 1 January 2021 which are NEDC tested only (minor amendments); and 

3. WLTP tested cars registered from 1 January 2021 - there are extra CO2 bands in this table to:-  

  • make the aligning of WLTP and NEDC equivalents more workable; and 

  • strengthen the environmental rationale of the tax by tying it closely to the “polluter pays” principle.  

As set out in the Budget documents, the rates for the bands into which the majority of cars fall are aligned as closely as possible to their equivalent in the NEDC table. Where there are divergences, these are approximately €10 per annum. 

According to the Minister’s Speech, VRT reliefs for plug-in hybrid electric vehicles and hybrids will expire because there will be much lower VRT rates for low emission cars. 

For the relevant rates of vehicles in each emissions category, see page 16 Annex B to Budget 2021 Tax Policy Changes

Fuel 

The cost of petrol and diesel will increase from tonight due to the €7.50  increase in carbon tax. This increase will apply to all other fuels from 1st May 2021. Tonight’s increase will add €1.30 to an average 60-litre tank of petrol and €1.51 to a tank of diesel.  

Tobacco excise duty 

Excise duty on a pack of 20 cigarettes will increase by 50 cents, with a pro-rata increase on other tobacco products. This change is expected to take effect from midnight tonight. This will bring the price of cigarettes in the most popular price category to €14.00 in support of the Government’s public health policy to reduce smoking levels in Irish society.  

The minimum excise duty rate on cigarettes is increasing so that any 20 pack priced below €11.50 will be subject to excise as if it were priced at €11.50