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Large car tax hit in budget

Drivers of larger vehicles will be hit with increased car tax, following on from Chancellor Alistair Darling’s budget announcement.

But the rise in fuel duty, expected to rise by 2p on April 1, has been postponed until the autumn.

From April 2009, new car buyers with CO2 above 160g/km will have to pay a supplement to vehicle excise duty (VED). For cars emitting more than 255g/km CO2 this rises to £950 (of which £455 is VED).

From April 2010, there will be a new first-year rate based on carbon dioxide emissions of the car. Cars that emit less than the proposed 130 g/km will pay no car tax at all in the first year. But a higher first year rate will be introduced on the most polluting cars.

Darling said it was “right that if people choose to buy a more polluting car that they should pay more in the first year to reflect the environmental cost. “

However, Sue Robinson, National Franchised Dealers Association director said: “The Chancellor is attempting to encourage the motorist to move to lower emitting cars with the increase in VED for large vehicles.

"He asserts that the reclassification of vehicles into six new VED bands will force motorists to choose lower emitting vehicles, but the inducements are so small, that the effects are likely to be equally small.”

She continued: “It will be those who really need larger vehicles for their daily lives that suffer most. Families, rural dwellers, farmers, and business users are less able to absorb this increase, as they are already paying extra to use their vehicles through fuel duty, company car tax and other measures.

The Society of Motor Manufacturers and Traders has said that sales taxes on higher emitting cars have little effect on CO2 emissions and create an unwelcome market distortion.

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