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Motorists facing tax increase for low emissions cars

The RAC says the vast majority of drivers buying new cars from April 1st will end up paying significantly more in car tax.

By Jon Francis | Published: 19th March 2017 Business

The RAC estimates that up to two-thirds of new vehicles sold from next month that fall into three of the most popular tax bands will leave their owners disproportionately worse off as a result of sweeping changes that are being made to the Vehicle Excise Duty system.

Drivers that buy a car that emits between 91g and 120g per km of CO2, such as a small family hatchback, will be up to £270 worse off over two years, and up to £680 worse off over five years than had they bought the same car before the end of March.

As a result of the change, the RAC is recommending anyone in the market for a brand new car, especially one that is adversely affected by the new tax rates, acts quickly and tries to secure a deal before the end of the month – or risk paying more in tax while they own the vehicle.

RAC roads policy spokesman Nick Lyes said: “Aside from the complexity of the new Vehicle Excise Duty bands, the simple truth is this – from a vehicle tax perspective, drivers who opt for a car that has very low emissions including hybrids will be worse off under the new system than before. This surely runs counter to the Government’s aim which is to encourage more of us to switch to newer, lower emission vehicles.

“The Government has been taking less in tax from drivers through Vehicle Excise Duty in recent years because new vehicles are emitting lower levels of CO2, so it’s perhaps not surprising that they would want to change things to stem the decline in tax revenue.

“But what is surprising, in our view, is the confusing new system unfairly and disproportionately disadvantages those buyers who seek to do the right thing – for both the environment, and for their wallet – by opting for a small, efficient petrol or diesel vehicle or one of the latest hybrids.

“We are concerned therefore that the VED changes actually discourage drivers from purchasing some of the cleanest vehicles. Only new pure electric cars with a list price of under £40,000 will continue to enjoy being totally exempt from VED. However, the problem is that there is still no great consumer shift towards pure electric vehicles, with only 2% of motorists telling us that is what they will opt for as their next car. This may reflect concerns about battery range, charging complexities and higher initial purchase costs.

“We strongly encourage the Government to either look again at the new VED rates as soon as possible, or provide extra support for those motorists who wish to switch to lower-emission vehicles.”