Friday, September 21, 2007

The impact of road tax changes in the UK

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Europe has been changing the taxing system on cars to adapt it to emissions. As a general rule, the more CO2 a car emits through the tailpipe, the higher its taxes are. In general, cars in Europe pay two types of taxes. One type is the purchase taxes, which depends a lot on the country. Then you have the road tax (or circulation tax): besides tolls, you need to pay a certain amount to drive your car.

The UK has a very specific tax system, in which there are different levels that depend on the CO2 emissions for both the purchase and road. The system is being changed for 2008. The most that Britons will have to pay for a car that falls in band G (the highest) is 2000 GBP (that's about $4,000US). has announced that this is a band that does not make luxury car buyers use the greenest options available. Band G is for cars that produce 225 CO2 g/km upwards.

In numbers: if you purchase an Audi A6 it doesn't matter if you purchase a smaller engine such as the 3.2 liter or the RS8. What's even more inadequate according to that website, a Renault Espace 2.0 T pays the same tax as Range Rover Supercharged.

Therefore, they're proposing the creation of an additional Band for the most polluting cars, called Band H. This Band would have a road tax figure of 500 GBP and would be for cars producing more than 275 CO2 g/km. The choice of raising road tax in front of purchase tax is that the high cost of luxury cars make the purchase tax irrelevant, because it's the price of an extra option of the car and it's only paid once, whereas a road tax is paid through the lifespan of the vehicle.

Luxury cars with lower emissions would benefit from this measure while real gas guzzlers would be more affected. Currently, the British luxury market has a high growth rate.




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