British Government Steps up Tax Pressure to Make Drivers Go Greener

But the manufacturers see red…

By Andy Bannister


In a move which could be copied by authorities around the world, the British Government has signalled it will be soon be using a big stick to persuade motorists to drive a smaller, less polluting car.

Annual road tax on newer cars in the UK is already calculated on a sliding scale based on carbon dioxide emissions. This is being stepped up, with more emission bands and much more overall to pay.

In addition, from 2010 new car buyers will also face a one-off “showroom tax” to cover the vehicle’s first year on the road. This will be nil for car emitting up to160 grammes of CO2 per kilometre, but will then soar up to £950 ($1925) for some vehicles whose emissions are over 255 g/km.

With new car sales in the UK already seemingly stalling in the wake of gloomier economic fortunes around the world, this is not good news for many manufacturers.

British premium marques like Land Rover and Jaguar will be among the worst hit. Buyers of models like the Range Rover Sport face having to fork out $1925 on purchase in 2010 and then around $950 each year after that.

It will certainly pay would-be purchasers in every showroom to read the small print carefully before deciding which exact model to buy, as there are huge disparities within individual model ranges.

BMW’s 3-series, for example, will attract a showroom tax ranging from nothing at all (on the least polluting diesel 320d) to $1100 on the 335i. Similarly, buyers of a VW Golf will pay between nothing and £750 ($1520) depending on the model.

These anomalies mean that the buyer of a diesel SUV could end up paying less than the driver of a less-obviously environmentally unfriendly model, such as a petrol (gasoline)-engined station wagon. That particularly applies for automatics, as they usually have worse carbon dioxide emissions that their manual counterparts.

The move is likely to accelerate the shift to diesel cars, with most modern diesels being significantly less polluting in terms of carbon dioxide emissions than their petrol equivalents.

Buyers who might decide to rush and replace their car in the next two years before the “showroom tax” comes in also need to think carefully about whether their shiny new vehicle will be an attractive “used” proposition given the hefty annual charge it will face to keep it on the road in the future. An ordinary petrol MPV like a Volkswagen Sharan could cost as much as $925 a year in road tax alone.

Of course, behind this big stick approach there is a carrot – buy a small, fuel efficient and less polluting car and your overall bill will probably go down significantly overall. Expect a rush of manufacturers developing cars which juts sneak under a particular carbon dioxide threshold.

Another possibly solution for car buyers, particularly of older vehicles, is to hang on to the old faithful. Cars registered before March 2001 still use the older system of annual taxation according to engine size alone.

Overall, it is a fairly grim outlook for motorists in a country where fuel prices are already among the highest in the world and congestion-charging schemes are beginning to gain a foothold.

Other European Union countries have their own schemes in place or in the pipeline, so expect this kind of measure to become more commonplace in years to come.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at

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  1. I’m sure I’m going to get raked over the coals for this, but I think we should have a similar system in the US, because it’s the only way that people will reduce their energy usage, the only way alternative energy will become more attractive to consumers and auto manufacturers, and the only way that mass transit will start looking like a viable alternative in many areas of the country.

  2. This is SOCIALISM in it’s worst form. This is the government tring to mandate what you drive. It’s not the government’s business how much gasoline you use, how you use it, or why, as long as you pay for it. I want less taxes, not more. This is some liberal’s fantasy.

  3. Totally agree. Of course we should have that kind of measure here in the US. One day we will. People won’t like it, but we have to face the consequences of our actions.

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