Car tax has always been a bone of contention for vehicle owners. That’s especially true thanks to the rising cost of running a car. Recent figures from confused.com highlighted a 5% increase in insurance costs in the last three months of 2021 compared to the previous quarter. Throw in the potential of higher rates for car tax, and it’s not surprising it’s caused a stir.
For the most part, we’re used to changing car tax bands as the government puts the squeeze on petrol and diesel cars. However, London drivers could feel the pinch even further with some additional changes suggested in a recent report.
There’s often a lot of speculation when new proposals are announced. So, read on to find out more about potential car tax changes alongside the expansion of the Ultra Low Emission Zone.
What are the new car tax proposals?
A recent report has outlined that drivers in London may be charged per journey they take in the city from 2024 – a pay-per-mile style scheme.
This change would aim to reduce carbon emissions and help to improve air quality. The Mayor of London has been campaigning for decarbonising initiatives over the past few years. Plus, Mr Khan backed the expansion of the Ultra Low Emissions Zone, which came into effect in October.
This new proposal by Sadiq Khan looks at aspects such as charging drivers by time, distance travelled and location. But, of course, technology to monitor these will take some time to develop. In the meantime, other changes have also been proposed. These include:
- A daily clean air charge for petrol and diesel cars travelling throughout the city.
- Further expansion of the Ultra Low Emission Zone (ULEZ), which has a daily charge of £12.50.
There could also be a combination of the two interim proposals. This could see drivers in London, and anyone travelling to the city feel the pinch even further.
Where is the Ultra Low Emission Zone (ULEZ)?
The introduction of low emission zones is nothing new. However, in October 2021, the capital’s ultra low emission zone grew 18 times its size. It covers central London and up to but not including the North and South Circular roads.
The reason for its expansion? An improvement in air quality. Before the pandemic, studies highlighted the previous ULEZ area contributed to a decrease in pollution of around 44%. With more extensive reach, residents will start to enjoy the benefits of this further.
However, there’s a downside. If your vehicle doesn’t meet the ULEZ emission standards, there’s a daily charge to pay. London now has three different charge rates depending on where you’re travelling:
- The congestion charge covers Central London and applies to nearly all vehicles. Since October 2021, hybrid cars will also have to pay this.
- The low emission zone (LEZ) applies to almost all of Greater London but mainly covers heavy polluting diesel vehicles.
- The ultra low emission zone (ULEZ) covers everywhere within the North and South Circular roads.
Pay-per-mile proposals outside of London
The above car tax change proposals come after last year’s broader pay-per-mile report complied by Greener Transport Solutions. This scheme is proposed to be mandatory from 2030 with the inclusion of electric cars. It could see charges of 2p per km for cars and higher costs for larger vehicles, vans and lorries.
The report also highlighted that grants and incentives should help people make the transition to electric vehicles. However, another pain point for petrol and diesel drivers sees calls for fuel duty to gradually increase over the next ten years.
The main concerns of the pay per mile car tax changes
Not surprisingly, one of the main frustrations and objections over these new proposals is the hike in cost to travel in London. Local MPs are also concerned about its effect on Greater London boroughs.
While most people will agree they want cleaner air and less polluting vehicles, for many, the switch to electric is not financially viable. In addition, the increase in costs for travelling in the capital could put a strain on families that run a car inside the charging zones.
Another example is how changes could present strains on health services. The MP for Dartford in neighbouring Kent highlighted more people would potentially travel to the area for hospital and health treatments to avoid ULEZ charges.
Another view is people feel the changes are a way to plug the tax hole for the Treasury. These new proposals are not exclusive to petrol and diesel cars. Electric car owners could also see car tax charges. When 2030 comes around, the government will be looking at different ways to recover the loss of funds from vehicle and excise duty. So, nothing is out of the picture at this point.
What’s to come?
While nothing is set in stone, 2030 will soon creep up. The government is encouraging the transition to electric vehicles. However, previous grant schemes, including the Electric Vehicle Homecharge Scheme (EVHS), are changing. This offered £350 towards the cost of installing a home charger. However, eligibility rules may mean you can’t get this helping hand from April 2022.
Other elements such as the Plug-in Car Grant are also being scaled back. These changes are said to be due to the increase in self-sufficiency in the market.
While grants and incentives may be taking a back seat, electric cars are becoming more affordable. However, if purchasing outright is not viable, the option to lease electric could help lower motoring costs in the long term.
