Owners and previous owners could be awarded between £3,000 and £4,000 on average for affected vehicles, lawyers said. Volkswagen Group admitted in September 2015 that 482,000 of its diesel vehicles in the US were fitted with defeat device software to switch engines to a cleaner mode when they were being tested for emissions.
The Wolfsburg-based company announced 11 million vehicles were affected worldwide - including almost 1.2 million in the UK.
The group legal action, the first in relation to the emissions scandal on behalf of UK customers, has been described as an opportunity to hold the firm to account.
Damon Parker, head of litigation at Harcus Sinclair UK Ltd, said: “We have paved the way for consumers who trusted but were let down by VW, Audi, Seat and Skoda to seek redress through our courts.
“It is only right that UK car owners affected by the scandal have the opportunity to seek compensation. We have secured funding so that those affected can bring this claim against VW at no cost to themselves.
“The group action aims to ensure that, if VW is found to have misled consumers about the environmental damage caused by their cars, they are penalised accordingly so as to discourage this sort of behaviour from happening again.”
Volkswagen has agreed a $15 billion (£11.8bn) settlement with the US authorities and owners of affected vehicles.
In October a Spanish court ordered that the owner of an affected Volkswagen car should be paid €5,000 (£4,300) by the manufacturer.
But there have been no such payouts in the UK. It emerged last month that the UK is one of four countries facing legal action by the European Union for not imposing penalties on Volkswagen over the issue.
Mary Creagh, chair of the Commons environmental audit committee, said: “In the absence of government action it is inevitable that motorists would take matters into their own hands and pursue private action in the courts.”
Harcus Sinclair is working with law firms including Slater and Gordon, and has set up a website www.vwemissionsaction.com for those interested in joining the lawsuit.
To date 10,000 individuals and a handful of small companies are part of the action, Mr Parker said.
The application for the group litigation order will be heard in the High Court on 30 January.