Road tax revamp will hit drivers of greenest cars

... but gas guzzler owners face bill of £2,000 a year

MANY of Britain’s motorists will pay a high price for cars getting ‘greener’ after George Osborne announced a major overhaul of road tax.

Drivers of eco-friendly hybrids and luxury vehicles will be hardest hit by the Chancellor’s reform of vehicle excise duty (VED).

But he pledged to spend the money on building and improving the nation’s major roads.

From April 2017 people who buy the dirtiest gas guzzlers will see the road tax they pay in the first year nearly double from £1,100 to £2,000.

After one year, all carbon-emitting cars will be taxed at a rate of £140, including low-emission vehicles such as the Toyota Prius, which currently attract zero road tax. Also, anyone who purchases a new car costing £40,000 or more will have to pay an additional annual surcharge of £310 from the second to sixth year after it is bought.

Car makers and motoring groups warned that the changes would have a detrimental effect on sales of eco-friendly hybrid vehicles and on the demand for UK-built luxury cars. At present 70 per cent of all new car buyers – some 1.7million a year – pay no road tax because their vehicle’s emissions are so low.

But in future, only drivers who buy a car that emits no CO2 emissions, such as those that run purely on electricity or hydrogen, will enjoy a zero rate of VED.

Mr Osborne argued that middle- class motorists with ‘ green’ but expensive cars have been able to avoid road tax while poorer families driving older and dirtier models are paying hundreds of pounds a year.

Under the new system, some 95 per cent of new cars will be charged a flat rate of £140 in VED after the first year – less than the average £166 paid today.

Mr Osborne said all revenue raised from VED in England would be allocated to a new Roads Fund to build and improve major routes.

Previous tax incentives to persuade drivers into greener cars have proved so effective that the Treasury has seen its tax take plummet.

Justifying the new system, the Chancellor told the Commons: ‘Because so many new cars now fall into the low carbon emission bands, by 2017 over three quarters of new cars will pay no VED at all

‘Unsustainable and unfair’

in the first year. This isn’t sustainable and it isn’t fair.

‘There will be no change to VED for existing cars – no one will pay more in tax than they do today for the car they already own.

‘In total we’ll only raise the same amount of revenue from VED in the future that we do today – but that revenue will be secure for the long term.’

Steve Gooding, director of the RAC Foundation, said: ‘ The Chancellor’s approach seems simple – if you buy zero, you pay zero, but the incentive for purchasing anything emitting above that, however small, is lost.’

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, was concerned by the changes.

He said the surcharge on premium cars – which make up about 7 per cent of new car sales – risked ‘undermining growth in UK manufacturing and exports’.