Tax on eco-friendly cars to soar by hundreds a year

... but £5bn Treasury raid will cut cost for big polluters!

MOTORISTS will be hit in the pocket for buying environmentally-friendly family cars because of flaws in George Osborne’s plans to shake up road tax, a study reveals today.

Some will be paying hundreds of pounds more because of a policy shift in vehicle excise duty rates from April next year.

But owners of many gas-guzzlers will benefit from what will effectively be a tax break for dirty cars.

It is claimed the changes, being brought in because the popularity of greener vehicles means the Government is missing out on valuable income, will yield an extra £5billion windfall for Treasury coffers over the first six years.

The study, by car price experts Parkers, says most of the extra revenue will be generated by additional tax on buyers of cars emitting 1g/ km to 130g/km of CO2. ‘The cleanest motorists will foot the largest slice of the tax rise,’ the report says. ‘This is inherently unfair.’

Drivers of some of the greenest family cars such as the Toyota Prius hybrid, Ford Mondeo, Nissan Qashqai and the Mini will be the biggest losers over the six years under the road tax shake-up.

A special rate will apply in the first year of ownership, ranging from zero up to £2,000, depending on the engine’s green credentials. After that, most owners of green cars will pay a flat rate of £140 a year. So a driver buying a hybrid car, which uses electricity and petrol and is currently exempt from road tax, will pay £10 in year one and £140 a year thereafter.

But owners of many high-performance cars and gas-guzzlers will be quids in because of a flat-rate payable after the first year.

New cars costing more than £40,000 will attract an extra fee of £310 a year for five years.

The changes to vehicle excise duty (VED) do not affect existing cars, only new purchases, so fami- lies who already own green cars, or buy them before April 2017, will not be affected. Motoring groups predict a surge in new car sales to beat the rule change.

Under the overhaul of the road tax system the current 13 bands of tax will be replaced by a threeband system where cars will be classified as zero emission, standard and premium.

Only cars that emit 0g/km of CO2 – only electric vehicles for now – will pay nothing, while all other cars will pay £140.

The exception is cars that cost more than £40,000, which will be subject to the extra £310 charge, meaning many will face a £450 annual road tax payment. This applies even to cars that emit 0g/ km which will have a £310 bill.

There are still 13 bands for the first year of a car’s life, with those that emit less CO2 paying less tax.

Parkers studied the small print of the Chancellor’s VED plans, announced last July, and crossmatched it with their own data to calculate the winners and losers.

The report says: ‘Government policy will hit the very owners who are lapping up cleaner cars, while some buyers of higher-polluting vehicles will see their road tax drop.’ The owner of a Toyota Prius producing 70g/km of CO2 will pay £725 over the first six years of the new car tax regime compared to nothing under the current system.

But Ford’s Mustang GT fastback producing 299g/km will cost £925 less to tax over six years.

AA president Edmund King said: ‘We believe the current system could have been reviewed to give more incentives for those that opt for lower emission vehicles.’

All revenue from VED in England will go to a new roads fund to build and improve major routes.