UK tax on new diesels does not make sense according to motor industry

27 November 2017

UK tax on new diesels does not make sense according to motor industry

27 November 2017

The UK Government has come under fire from the automotive industry for its plan to increase vehicle excise duty (VED) on new diesels for their first year of registration. 

In the annual budget, the Chancellor of the Exchequer, Philip Hammond, announced that in order to fund the country’s Clean Air Strategy, it would place new diesel cars sold after April 2018 in the next highest band of VED for its first year. This could mean a rise of between £20 (€22) and £500 (€558) depending on engine size. However, registrations of new diesel vehicles have dropped dramatically in 2017, by over 500,000, while used models have increased their sales. 

Therefore, in order to arrest the slump, manufacturers expected a tax to hit older, more polluting diesels, forcing drivers of those vehicles to upgrade to a new cleaner model. Currently, the VED on a diesel registered between April 2001 and April 2017 can be as little as £30 (€33) per year, as the figures are based on CO2 output only. New VED rates came into force in April 2017 increasing the tax on diesels. 

The new VED increase will only be enacted until such a time that a vehicle is rated to pass the second set of real-world driving emission (RDE) standards as part of the new Worldwide Harmonised Light-Vehicle Test Procedure (WLTP). This will force manufacturers to prove what their cars emit in laboratory conditions is exactly matched on the roads. However, it doesn't come into force until 2020 for newly launched cars and 2021 for all new cars, likely alongside Euro 7 regulations, meaning that for the first year and a half at least, this is a straight tax hike for new diesels 

‘Our greatest concern is the continuing mixed messages around diesel which will only deter and confuse the public further,’ says Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT). ‘Diesel buyers will not face any additional taxation for the next six months, but thereafter, will face additional charges which will undermine fleet renewal efforts, which are the best and quickest way to address air quality concerns. Manufacturers are investing heavily in the latest low emission technology, however, it’s unrealistic to think that we can fast-track the introduction of the next generation of clean diesel technology which takes years to develop, in just four months. This budget will also do nothing to remove the oldest, most polluting vehicles from our roads in the coming years.’ 

Jaguar Land Rover admitted that the UK government's move did incentivize the purchase of cleaner diesels but pointed out that a lot of new-car sales would be taxed at the higher rate before then. JLR has the highest diesel penetration of any manufacturer in Europe, with 96% of Land Rovers and 84% of Jaguar sold in the region in 2016, according to figures from Sweden-based analyst firm AID. The new ruling would push the first-year duty tax for a Land Rover Discovery Sport 180PS from £200 (€223) to £500 (€558). For a lower powered version, it would be a lot less, adding just £40 (€45).