Hundreds of thousands of diesel drivers are to be hit by a £550million tax grab.
Philip Hammond announced higher Vehicle Excise Duty (VED) on new diesel cars yesterday – and a tax rise for owners of diesel company cars.
The VED increase, which will apply to new diesel cars registered from April 1 next year, will force buyers to pay up to £500 extra in the first year of ownership and raise more than £250million in total.
All new diesels will be hit unless they meet EU ‘real-driving’ emissions standards, which will reflect more accurately a vehicle’s emissions in real driving conditions rather than in the lab – even though the tests are not due for two years.
Philip Hammond announced higher Vehicle Excise Duty (VED) on new diesel cars yesterday – and a tax rise for owners of diesel company cars
Diesel owners will be targeted because their vehicles produce more toxic nitrogen oxides than petrol engines
But Mr Hammond said van drivers would be exempt, adding: ‘No white van man or woman will be hit by these measures.’
The owners of 12million existing diesel cars will not be affected by the changes. However, Mr Hammond will penalise the 750,000 workers who drive diesel company cars. From April next year, the tax surcharge on diesel cars will rise from 3 per cent to 4 per cent, raising £295million for the Treasury over five years.
This equates to an annual tax increase of up to £250 for higher earners with more expensive company cars.
Motorist switching from diesel to electric
Martin Cotton has already ordered an electric car to replace his 11-year-old BMW, which is now classified as a ‘dirty diesel’.
The 66-year-old, left, swapped before diesel owners were hit with higher fuel and vehicle excise duty costs.
He has another diesel car, but expects to change that, too, soon – along with many making the shift from diesel to electric promoted by the Budget.
Mr Cotton, who rents out properties around Britain, travels long distances for work and is confident that an electric car will save him money.
Motorist Martin Cotton has already ordered an electric car to replace his 11-year-old BMW, which is now classified as a ‘dirty diesel’
He recently ordered an electric BMW I3 for delivery in March 2018 – a few months later than expected.
‘BMW must have had a large number of orders as the delivery date has been pushed back a few months’, he said. My intention is to have two electric cars, but I’ll wait until they bring out a model that can do longer distances before getting the second.’
Speaking about yesterday’s Budget, Mr Cotton, who lives in St Albans, Hertfordshire, with his wife Pauline, said: ‘I expect diesel fuel duty will rise in the next few years – they probably froze it this time around to get more votes.
‘It’s great that the Government has pledged money to improve the infrastructure for electric cars. I imagine more people will make the switch.’
The BMW I3 can travel roughly 120 miles on a single charge, although future models are expected to cover more than twice that distance.
He said: ‘The problem that might put people off an electric vehicle is the upfront cost. But I think it works out cheaper in the long term. Running an electric car costs 4p per mile compared to double that for a diesel.
‘It would be nice to see the Government provide more help in the cost of installing a home charging point for the car. They currently cover 75 per cent of the cost but some people, such as myself, still have to buy extra parts, which can come to £2,000.’
The money raised from increasing taxes on diesel drivers will support a £220million clean air fund to tackle pollution.
Critics said diesel drivers were being penalised having been encouraged to buy the vehicles by previous governments because they create less carbon dioxide.
Diesel cars are now being targeted because they produce more toxic nitrogen oxides than petrol engines.
But motoring campaigners welcomed the decision to extend the freeze on fuel duty for both diesel and petrol, cancelling the rise that was due in April.
Experts had expected the Chancellor to increase fuel duty by 1p for diesel and reduce it by 1p for petrol.
Yesterday, he said the Government’s decision to freeze fuel duty since 2010 had ‘saved the average car driver £850, and the average van driver over £2,100, compared to Labour’s escalator plans’.
But electric cars get a boost
In a bid to persuade more drivers to switch from diesel and petrol cars, Philip Hammond announced a boost for electric vehicles
Electric cars are in line for a £540million funding boost in a bid to persuade more drivers to ditch diesel and petrol cars.
The Government will contribute £200million to a £400million fund to invest in the electric vehicle charging network, with the rest coming from private investment.
A further £40million will be set aside to invest in new technology to charge electric cars more quickly and efficiently.
Mr Hammond committed another £100million to maintain the government subsidy which is currently enjoyed by those who buy electric cars until 2020. This contributes up to £4,500 to the cost of buying an electric vehicle.
There are 115,000 electric cars in the UK and 13,000 charging points. But even the fastest chargers take half an hour or more to fully charge a vehicle.
Mr Hammond announced that motorists who charge their own electric vehicle at work will no longer incur a tax charge as a benefit in kind. And the Government restated its ambition to see the first driverless cars on Britain’s roads by 2021.
He added: ‘Fuel duty has been frozen for the longest period in 40 years, at a cost to the Exchequer of £46billion since 2010.’
The latest freeze will cost the exchequer £4.25billion over five years, dwarfing the amount raised from the tax rises for diesel.
Owners of new and used diesel vehicles will face a bigger tax bill as the Government cracks down on nitrogen oxide emissions.
Those who buy a new diesel car registered after April 1 next year will be pushed into the higher band of VED, based in the first year on carbon dioxide emissions. After that a flat annual rate is charged.
It means those who buy smaller diesel cars such as a Ford Fiesta will see their tax bill in the first year of ownership go up by £20. But those who buy more expensive cars such as a Land Rover Discovery or a Porsche Cayenne will see their bill go up by £400 and £500 respectively in the first year.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said: ‘Manufacturers are investing heavily in the latest low-emission technology. This budget will do nothing to remove the oldest, most polluting vehicles from our roads.’
AA president Edmund King said the Government should do more to crack down on pollution from trucks and buses, and Howard Cox, from the campaign group FairFuelUK, said: ‘The VED and company car changes will be devastating on car saleability, their values, the production of new diesels and, of course, jobs.’