Car tax hike will send bills soaring

Published on Saturday 12 July 2008 14:24

Owners of best-selling vehicles will suffer, warns Nic Cicutti.

MILLIONS of motorists struggling with sky-high mortgages and rocketing inflation have had their worst fears confirmed as the Government admitted its car tax proposals mean almost half the UK's car owners will pay more.

Figures released by the Treasury revealed that, contrary to earlier claims, the owners of 43% of all cars would be worse off and fewer than one in five will see their tax bill fall.

Ministers claim the main aim of the proposals is to cut down on CO2 emissions by raising road tax for the worst polluters and lowering it for those with better CO2 performance.

Currently, cars bought after March 2001 and registered before March 2006 are liable for a maximum of 210 in car tax. But under the Government's plans, from 2010 the most polluting cars would pay 455. Those with the least CO2 emissions would pay less than now.

The road tax changes were approved by the Commons earlier this month after a fractious debate which saw Chancellor Alistair Darling accused of levying a stealth tax and penalising existing owners who cannot afford to buy new, less polluting cars.

Motoring groups have lined up to condemn the increase. AA president Edmund King said: "This will hit millions of hard-up families. Coupled with the record pump prices it will bring double misery to millions of motorists."

Experts have calculated that, if the proposals go through, Treasury coffers will receive an extra 1bn by 2011, suggesting the aim is not just to cut pollution but to raise more revenue through increased taxes.

They also point out that some of the cars hit by higher tax are among the most popular on the road today.

Ashton Berkhauer, an insurance expert with the price comparison site uSwitch, says: "The best-selling cars in the UK will see a 12% rise in road tax, meaning motorists will be forking out an extra 25 a year on average.

"It's not just the typical gas-guzzlers or luxury cars that will take a hit. From 2009-2010, the new road tax reforms will cost drivers of popular cars like the Vauxhall Vectra an extra 90 a year, a 43% hike in their tax."

Increased road tax is another bitter pill for motorists who are already forking out an extra 18 on average every time they fill their tank at the pumps, according to uSwitch. Filling up a typical Ford Fiesta now costs 67 on average, compared with 49 in 2007.

Based on a Fiesta's average consumption of 46 miles per gallon and someone driving 12,000 miles a year, this adds almost 40 a month to a typical motorist's driving bill.

Meanwhile, car insurance costs are also rising. According to brokers AA Insurance, average premiums have gone up 5.8% in the 12 months to April 2008, an average of 37 more.

Even so, Andrew Strong, chief executive of AA Insurance, claims the rises seen so far are actually rather modest: "There are increasing costs such as legal expenses and personal injury claims. For every 100 taken in premiums, the industry shells out 112 in claims. There will be a point when large premium increases become inevitable."

Strong adds, however, that those prepared to shop around for cheaper cover can cut their costs significantly.

Insurer More Than is launching what it calls Green Wheels Insurance, where drivers fit a small device to their vehicle engine management systems. The device records how they drive and transmits the information to a computer which then calculates how efficient their driving style is in terms of fuel consumption.

More Than product director Dowshan Humzah says: "Green Wheels helps motorists to adapt their driving style to reduce their carbon emissions and lower their impact on the environment, but fuel efficiency and running costs go hand in hand with eco-driving."

Five tips for an economy drive

&#149 Use www.petrolprices.com to find the cheapest petrol station in your postcode area.

&#149 Use price comparison websites to find cheaper quotes for insurance.

&#149 Consider alternative fuels. Biodiesel is often cheaper than standard diesel, especially if it comes from waste vegetable oil.

&#149 Drive carefully, maintain a constant speed, don't accelerate or break too sharply, stay within speed limits and keep your air con off. Experts say you could cut fuel consumption by up to 25%.

&#149 If you are looking to buy a car between now and 2010, avoid gas-guzzlers and high-polluters which will incur higher road tax.