Low CO2 emission cars contribute to UK tax shortfall

outlander-phev-frontThe number of motorists in the UK opting for environmentally friendly new cars has reached such a high level that it has impacted on the Treasury’s road tax income. Data issued by the Society of Motor Manufacturers and Traders (SMMT) this week shows nearly 70 per cent of the new cars to hit the UK’s roads last year were tax exempt.

Owners of new vehicles with CO2 emissions below 130g per kilometre do not have to pay any tax for the first year their vehicles are on the road. Car makers have concentrated their resources and development on producing cars with low CO2 emissions and the number of vehicles exempt from tax is now far greater than when the laws were last amended in 2009.

Cars like the Mitsubishi Outlander PHEV are at the vanguard of the UK’s switch to hybrid electric-petrol cars as well as petrol and diesel powered vehicles that have been designed to conserve fuel. The figures also show that percentagewise drivers in the UK last year bought more electric or hybrid cars than people in other European nations did.

Drivers in the UK purchased nearly 15,000 so-called plug-in cars during 2014. Although this is not a great proportion of the total 2.5 million new cars driven off garage forecourts, it represents a significant increase on previous years.

After cars have been on the road for one year, tax bands change and only those with under 100g CO2 emissions per kilometre are tax exempt. Owners of cars with higher emissions do pay tax, but at rates that have left the government trying to balance the books.

SMMT boss Mike Hawes says the next government will have to find the balance between generating income from drivers and encouraging them to buy green vehicles. Whatever action is taken will also need to spur manufacturers into continued investment in environmentally friendly engines.



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