Motorists pay around 7% of all UK taxation through direct taxes on their vehicle usage
Motorists pay around 7% of all UK taxation through direct taxes on their vehicle usage, according to the RAC Foundation, coming in at a whopping £31.1 billion in 2010 and increasing to £38 billion by the end of 2012. This takes into account Fuel Duty, Vehicle Excise Duty (road tax) and VAT on fuel.
What it doesn’t take into account is the hidden taxes that are already within the price you pay for your car, such as VAT on the purchase price on a new car or the margin the dealer makes on a used car, which are applied at the same rate.
The Government also receives revenue from Company Car tax and the London Congestion Charge and your local authority from parking fees (tax for going shopping) and parking fines (tax for shopping for too long).
With motorists reticent to leave their cars at home due to overcrowded public transport, it seems that the taxman has it all his own way.
But car manufacturers have been one step ahead of the game, with many new models being tax exempt in one way or another. This is causing headaches for the Government, as research form the Institute of Fiscal Studies shows that even though road traffic is set to increase by 44% by 2035, tax revenues from motorists are set to drop by £13 billion a year too.
All electric cars such as the Vauxhall Ampera, the Renault Twizy and Zoe and the Chevrolet Volt pay no fuel duty, are exempt from the London Congestion Charge and also pay zero road tax. Currently prices are at a premium, but the taxman actually gives you money if you buy one of these in the form of a £5000 discount off the price.
Whilst these are in the minority, there are rafts of more mainstream hybrid and diesel models that are very economical which canny motorist are using to minimise their costs.
Any vehicle with CO2 emissions under 100g/km is currently congestion charge free, has a company car tax bracket of only 10% if provided by a business and most importantly, is likely to do well over 60 miles per gallon. Examples of the latest super efficient cars are the Peugeot 208, which does up to 83.1 miles per gallon , the Seat Leon Ecomotive which does up to 74.3 MPG and the Hyundai i20 which manages 88.3 miles per gallon on the combined cycle.
No wonder the taxman is in such a hurry to raise duties with modern cars far outperforming their older rivals in economy terms. But car manufacturers seem to be making bigger gains than the Government is expecting, so let’s hope they keep raising the bar at the same rate.