Car tax to rise for most drivers who buy new vehicles, RAC claims

The vast majority of drivers buying new cars will pay significantly more in car tax from April 1, a motoring organisation has claimed.

Up to two-thirds of new vehicles that fall into three of the most popular tax bands will leave their owners worse off as a result of sweeping changes being made to Vehicle Excise Duty (VED), according to the RAC.

The breakdown rescue firm warned the new rules will discourage people from buying some of the least polluting models.

It found that the vast majority of vehicles, unless they are pure electric or one of a few exceptions, will be subject to the same standard rate of annual tax from the second year of ownership.

Car tax rates vary depending on a vehicle's engine size, fuel type, year of registration and CO2 emissions and in terms of banding, the higher the emissions, the higher the rate of tax.

After paying varying amounts in year one, depending on their car's CO2 emissions, they will then be charged a flat annual rate of £140.

Under existing rules, cars emitting up to 100g CO2 per kilometre pay nothing, while those emitting between 101 to 110g pay £20.

RAC analysis found that a small family hatchback could leave owners up to £270 worse off after two years and as much as £680 out of pocket over five years than if they had bought the same car before the end of this month.

Buyers opting for ultra-low emission vehicles, which include some of the cleanest plug-in hybrids on the market, such as the Mitsubishi Outlander PHEV, will lose up to £145 over two years, compared with someone who had completed the purchase on March 31.

Nick Lyes, RAC roads policy spokesman, said: "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.

"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."