Secret tax adds £200 to cost of running family cars

Tens of thousands of families will have to pay up to £245 extra a year under new road tax rules after a covert government decision to include cars up to seven years old.

The Treasury admitted to The Times last night that it was quietly abolishing the exemption for older cars from the highest rates of vehicle excise duty. This means that owners of larger cars bought since March 2001 will find that their road tax will rise steeply from next April.

The increases are being introduced in two stages, with many owners who are now paying £210 a year being charged £300 in 2009 and up to £455 in 2010.

The revelation comes amid motoring costs soar. Petrol prices reached £5 a gallon yesterday. One consumer body believes that by next year it could cost £84 to fill an average car with fuel.

The new road tax was announced in last month’s Budget but its impact is only now becoming clear.

Owners of models of the Renault Espace, Vauxhall Zafira, VW Sharan, Ford Galaxy, Citroën C8, Vol-vo XC90 and others that emit more than 225g of carbon dioxide per kilometre, will pay £430 in 2010 compared with £210 this year. Owners of medium-sized cars that emit more than 180g/km, including some Ford Mondeos, will find taxes rising by up to £100.

Those who try to sell their cars will find that the value has fallen sharply because of increases in fuel prices and road tax. The AA said that many people were falling into a “negative equity” trap, with their cars worth thousands of pounds less than outstanding loans.

Motoring groups said that it was unfair to penalise families who bought their cars several years ago, when people knew less about the consequences of CO 2 emissions.

The Government began varying road tax rates in 2001 but did not introduce the band G rate for cars that emit more than 225g/km, until March 2006. In the Budget that year, Gordon Brown, then the Chancellor, said that no car registered before March 23, 2006, would have to pay the band G rate.

In last month’s Budget, Alistair Darling announced a new system of 13 bands, from A to M, coming into force next April and a showroom tax of up to £950 starting in April 2010. The Chancellor said that the changes would raise an additional £1.2 billion up to March 2011 but failed to make clear that a significant portion of this would be paid by owners of older cars who would lose their exemption.

Paul Watters, head of roads policy at the AA, said: “The Government presented the changes as means of influencing people’s purchasing decisions, but it turns out that they are also penalising hard-pressed families who have been running the same car for many years.

“This will hit people who are already struggling to pay higher fuel bills and who bought their cars in good faith, not realising that the Government would move the goalposts.”

Information about the new rates is buried in an appendix to the Budget report and is not mentioned on the DVLA’s website page on vehicle tax.

Nigel Humphries, of the Association of British Drivers, said: “This impacts hardest on poorer families who need larger cars. Such drivers may not even realise the huge rises on older Mondeos, Lagunas, Vectras and Galaxies even with middle range engines until VED renewal time. Even some smaller cars such as Astras and Focuses are hit.

“The arrogance of Darling is astonishing. When questioned in a radio interview following the budget he suggested that those affected needn’t pay higher VED as they could buy new cars. Just how are they supposed to do that when food, council tax and mortgages are all up way above inflation?”

A Treasury spokesman said: “The Budget 2008 reforms aim to ensure that there are appropriate and consistent VED signals across the VED system — the more polluting the vehicle, the more VED it will pay — to encourage the purchase of fuel-efficient vehicles.

"Cars emitting over 226g CO2/km but bought before Budget 06 will move into Band K in 2009-10 — and will continue to benefit from a reduced rate, and only in 2010-11 will these cars be placed into the band that corresponds to the car’s CO2 emissions.”