Car tax hikes delayed in the Pre-Budget Report, but motorists will not benefit from the VAT cut as petrol duty is raised by 2p. Chancellor Alistair Darling said that a wider range of car tax bands reflecting fuel efficiency would still be introduced, but all rates would go up by a maximum of just £5 next year.
The most polluting cars will then only see a maximum rise of £30 in 2010, however no guarantees of what will happen to car tax in 2011 and beyond have been given.
But motorists have had hopes dashed that a VAT cut from 17.5% to 15% would bring cheaper petrol, with the Chancellor saying this would be offset by a rise in fuel duty.
The Pre-Budget Report has announced that the 2p per litre increase in fuel duty, originally planned for April 2008 but delayed due to high petrol prices, will now be introduced 1 December 2008.
Motorists will then see a further hike in fuel duty of 1.84p per litre on 1 April 2009.
The 13 road tax bands announced in the Budget earlier this year, would replace the existing A to G categories from 2009/10.
The new top band M would have a £425 annual charge from April 2009, compared to £400 this year and £300 in 2007/2008. The top band will now only pay £405 next year.
Although the car tax changes were aimed at hitting gas guzzlers, many mid-range family cars, such as a Ford Mondeo, would have seen road tax rise from £210 this year to £300 next year and £310 in 2010. This will now be limited to £215 and £245 in 2009 and 2010, repectively.
Under Mr Darling’s proposals this would be limited to £215 from next April, and £240 in 2010. However, the Chancellor gave no indication as to whether rises would be limited beyond this.
The new car showroom tax will not be delayed with the most polluting cars facing a £950 charge from April.
Cars that emit over 225g/km, but were registered between 1 March 2001 and 23 March 2006, will be moved into the new band K in 2009 and stay there in 2010.
The Chancellor said recent falls in petrol prices meant that he would not pass on the VAT cut to motorist. However, while petrol and diesel prices have come down over the past month they are still relatively high compared to the price of oil, which has tumbled below $50 a barrel.
Under the original road tax proposals, cars will be divided into 13 groups depending on carbon dioxide emissions. Annual road tax would be charged at £440 for the top band in 2009 and £455 the year after.