2021 Diesel tax: new charges and surcharges for UK drivers

Emissions surcharges, extra parking fees and now tax increases: see what's in store for the drivers of older diesel cars

BuyaCar team
Jun 8, 2022

Millions of diesel car drivers are now obliged to pay a £12.50 daily fee to drive in the centre of London, after the capital launched its Ultra Low Emission Zone (ULEZ), with the zone affected having drastically increased in size from 25 October 2021.

The measure is just the first in a series of low emission zones that are being rolled out across the UK, and which will largely target drivers of older diesel vehicles - based upon the perception that diesels emit more pollutants than petrol equivalents. Birmingham set up its own clean air zone in June 2021 and more than a dozen other areas are considering similar schemes. Read more about the London ULEZ charge and the ULEZ-exempt petrol and diesel cars.

These are part of a government-led crusade to tackle air pollution, which is hitting diesel owners in the wallet. As well as charging zones, many councils are introducing diesel parking surcharges of up to 50% - even for the cleanest cars - and there have been increases in car tax and company car tax for some diesels, too.

It’s no wonder that diesel car sales are down dramatically compared with a few years back. But despite the extra charges and taxes, which will cost some drivers more than £60 extra every week, diesel could still make sense, particularly if you choose a recent model that complies with the latest emissions standards - known as Euro 6 - and cover many miles, which will give you a chance to save money on fuel compared with a petrol equivalent.

Diesel models are typically more economical than equivalent petrol cars and so if you rack up tens of thousands of miles every year, you may save enough in fuel costs to warrant driving a diesel car. Those after a diesel are best protected by choosing a Euro 6-compliant model as these will avoid some upcoming emission charges. Scroll down for the full picture.

The extra taxes and surcharges being introduced, include:

  • Higher road tax and company car tax for diesel drivers Read more
  • Charges to drive in the centre of London Read more
  • Charges to drive in other city centres Read more
  • Parking surcharges for diesel cars Read more
  • Increased cost of parking permits for diesel owners Read more
  • Fines for driving in certain East London streets Read more

Read on for more details of the plans or jump to our guide to beat the diesel tax.

Skip to the bottom of the page for more on why diesel cars are being demonised.

Diesel tax increases

Tax for almost three million diesel drivers went up a few years back, when the Chancellor introduced higher charges for company car users and new diesel car buyers. The measures were expected to raise £195 million for the Treasury.

The road tax increase pushes most new diesel cars up a tax band, adding between £15 and £520 to the cost of taxing a car for the first time. The company car surcharge has also increased, so drivers of many popular diesel cars will pay at least £350 more than previously.

The diesel crackdown is part of the government’s plan to improve air quality, which fails to meet legal limits in a number of different local authority areas, with the sale of new petrol and diesel cars set to be phased out by 2030.

Diesel drivers in some cities won't need much encouragement at all, with the introduction of low emission zones in some areas making driving an older diesel car very expensive. London's ULEZ already imposes a £12.50-per-day charge for some very old petrol cars and most diesel cars that were first sold before September 2015.

Cars registered after that date had to comply with Euro 6 emissions regulations, restricting the number of toxic gases and particles in exhaust fumes. These vehicles are not being targeted by most of the charges.

Birmingham also now has its own clean air zone. Glasgow councillors, meanwhile, want to ban pre-Euro 6 diesel cars from parts of the city centre entirely from 2022. Several other cities are considering their own low emission zones, too.

Drop in demand for diesel

Research by BuyaCar has indicated that the diesel crackdown is having an effect. More than half of current diesel owners are planning to change their car for a petrol, electric or hybrid vehicle and savings of more than a quarter are available on some nearly new diesel cars, which can make them cheaper than the equivalent petrol model.

Across the whole market, price reductions are less dramatic according to cap hpi, which monitors used car values. The firm says that larger diesel cars, including SUVs, are expected to hold their value better than smaller vehicles, which are more suited to petrol engines.

Experts advise that leasing or taking out Personal Contract Purchase (PCP) finance ensures that you won't have to foot the bill if your car is worth less than expected at the end of your agreement - as with leasing you never own the car and PCP finance allows you to hand the car back at the end of the contract.

There’s still time to take advantage of a scrappage scheme, with some brands offering several thousand pounds to trade in an old diesel car for a brand new vehicle.

Draconian diesel charges

Motoring groups have warned that officials need to balance the need to improve air pollution without draconian penalties for motorists. Many drivers rely on diesel for lower-cost long-distance motoring, or to power a larger car such as a people carrier, which could prove very costly to fuel if it were powered by petrol.

"In the early 2000s, we were encouraged in this dash for diesel and Gordon Brown gave tax incentives to buy them, which meant that the proportion of diesel cars on the road increased substantially," said Edmund King, president of the AA. "Many of these people live on the outskirts of urban areas and they are finding that they could be clobbered by low emissions zones or extra parking charges.

"We also need to remember that new diesel cars are much cleaner. If you are doing long-distance journeys, then a diesel vehicle is probably right for you because it will be more economical over a long distance. Large cars like people carriers are usually more economical with a diesel engine too."

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Proposed taxes on diesel cars

Diesel car tax increase

Until 2017, petrol and diesel vehicles were taxed at the same rate, based on their emissions. But since then, diesel cars have been pushed up by one tax band; the initial cost of taxing them is between £15 and £520 more than for a petrol car with identical carbon dioxide emissions.

Efficient models were least affected by the rise, with diesels that emit 91-100g/km of carbon dioxide costing £160 a year to tax, compared with £140 for petrol cars. But those that emit between 131 and 150g/km, including many popular family models, face a first-year tax bill of £555, while the buyer of an equivalent petrol car would pay £220.

The increase is only limited to the first year that a car is taxed. In subsequent years, they are subject to the same £155 flat rate as petrol versions.

Company car drivers were penalised too, with benefit in kind rates increasing for particularly polluting models.

The rise in diesel road tax and company car tax is temporary, as it does not apply to cars that meet an updated emission standard, known as Euro 6d. These cars have been tested on the road to ensure that they are clean in real-world conditions. The first cars that meet the standard have already gone on sale, and include some Mercedes A-Class and Jaguar XE models.
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Diesel car charges in London

Ultra Low Emission Zone (ULEZ)

There are 12.9 million diesel cars on Britain's roads, according to the Department for Transport, and around 9.5 million of those don't meet current Euro 6 emissions standards, which only became mandatory for new cars from September 2015.

Owners of non-Euro 6 diesel cars and vans face a daily charge of £12.50 to drive in the capital's Ultra Low Emission Zone (ULEZ), which previously covered the same area as the Congestion Zone but since October 2021 covers a much larger area between the North and South Circular roads.

And as the Congestion Charge still applies, you could end up paying £24 per day just to drive into the centre of the city. Fortunately, prices of Euro 6 diesel cars and Euro 6 diesel vans are increasingly affordable.

The rules are far less strict for petrol vehicles, which need to meet older Euro 4 standards.

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Other city diesel charges

By the end of 2021, there could be more than a dozen clean air zones in Britain, with many imposing charges on older diesel cars that are driven into city centres, according to a technical report from the Department for Environment, Food and Rural Affairs (Defra).

That's because dozens of areas are failing to meet legal air quality limits and are being forced to cut pollution by the courts.

Councils are expected to set up clean air zones where they will concentrate on anti-pollution efforts. Tolls are expected to be part of this. Birmingham has confirmed a clean air zone which includes charges for car drivers.

Some Scottish cities are expected to ban older diesel cars from some city centres altogether, with Glasgow planning to restrict access from 2022.

A technical report for Defra found that charging is far and away the most effective method of reducing pollution to within legal limits. “It is clear that charging clean air zones have the greatest impact by bringing the majority of zones into compliance by 2021,” it concluded.

Drivers of all but the most recent diesel cars, which meet Euro 6 regulations that came into force in September 2015, are likely to be charged to enter clean air zones.

Defra is creating a sticker for new and second-hand cars that will tell buyers whether a vehicle will incur charges when driven into a clean air zone.

The government is being forced to take a tough approach because it was forced to improve its air quality plan. It follows a High Court ruling that the original - published in 2015 - was too weak to tackle the problem. Since then, evidence has also emerged that the latest diesel engines are generally dirtier than had been expected, which makes reducing air pollution more difficult.

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Diesel surcharges for parking permits

Increasing numbers of councils are adding extra charges to the cost of parking permits for diesel cars. Residents in Islington, North London, must pay an extra £96 per year, while Merton in South London is about to start charging diesel owners £90 per year. Owners of older diesel cars in Hammersmith and Fulham, West London, will have to pay £20 per year, rising to £60 per year over two years.

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Higher parking fees for diesel drivers

Parking surcharges for diesel cars are set to expand across the country after being introduced in London. Bath, Birmingham and Manchester are among the cities that are examining so-called differential pricing, which penalises diesel owners.

In the centre of the capital, Westminster Council plans to raise on-street parking prices by 50% for all diesel cars sold before 2015, even if they meet current emission standards. Cars are identified when drivers tap in their registration number to pay by phone or at a machine.

The scheme was trialled in Marylebone, where drivers of petrol cars paid £4.90 per hour to park, while owners of affected diesel cars paid £7.35 per hour - 12p per minute. Westminster said that the pilot scheme reduced the amount of older diesels parking in the area by 16%, and that there was "no obvious displacement to nearby parking zones".

Westminster has consulted residents on its plans, saying that the scheme was in response to "some of the highest pollution levels in London". Part of the revenue will be used to pay for a team of so-called Air Wardens, who will patrol the roads and encourage drivers to turn off their engines when they are stopped.

Since Westminster's trial, other London boroughs have raised prices for diesel drivers. Islington has imposed a £2 surcharge on all short-stay parking for diesel drivers. Again, the car is identified when drivers tap in their registration number to pay. Camden has also introduced a diesel surcharge of up to 21.5%. Both boroughs impose the surcharge on all diesel cars - even the very latest and cleanest models.

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Fines for driving in parts of East London

Most cars are now banned from driving down certain streets in East London during rush hour. It's part of efforts to improve air quality in the polluted Old Street area.

There are two zones, made up of five streets and cameras will enforce the ban. Only vehicles classed as Ultra Low Emission (ULEV) are allowed to drive down the roads during the 7am to 10am and 4pm to 7pm restricted periods from Monday to Friday. Drivers of any other vehicles will be fined £130.

These vehicles must have CO2 emissions of less than 75g/km, which rules out some popular hybrid cars, including the standard Toyota Prius, but does include most plug-in hybrid models, as well as electric cars.

Heathrow emissions charge

Britain’s biggest airport has proposed an emissions charge for vehicles driving to the airport, as part of its plans to reduce the air pollution impact of a new, third runway. It has not yet submitted detailed plans, but diesel cars are almost certain to be affected. The plans may also include many petrol vehicles.

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Should I sell my diesel car to avoid future charges and taxes?

At the moment, it's not clear how widespread Clean Air Zones will be, and how many of them will impose charges on cars; some are expected to target lorries and vans only.

Ministers will be aware that large family cars, including people carriers, as well as crossovers and tall, rugged SUVs are mainly powered by diesel engines. They will be reluctant to impose a raft of extra charges on this section of voters, particularly as many will have bought them for their good fuel economy and low carbon dioxide emissions - championed by the government in previous years.

It means that it's probably not worth rushing to sell if you're continuing to get cheap, reliable motoring from your vehicle. However, when you come to buy your next car, you should think carefully about the choice between petrol or diesel and you may want to consider going electric. Buying a diesel on some types of finance can also help protect against a sudden drop in value, as you don't own the car.

Should I buy a diesel car? Read our guide

If you own a diesel car that's affected by London's Ultra Low Emissions Zone (most models registered before September 2015) and you regularly drive in London, then changing it for a new car is likely to be worthwhile. See below for your options.

It's likely that parts of Southampton, Birmingham and Nottingham will make life more difficult for diesel drivers shortly, whether through charging or road closures but it's unlikely to be a problem if you avoid the busy and congested parts of town. It also remains to be seen whether residents will be given any discount or scrappage scheme.

Older cars have clearly fallen out of favour but these vehicles, first registered before 2006, are already worth a fraction of their price when new. If demand does drop, they are worth a little less but in most cases, there's not a great deal to lose.

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Scrappage scheme

The government has said that councils will be able to propose local scrappage schemes if they are effective and good value for money, but car manufacturers have already acted by launching their own scrappage schemes.

These typically offer up to £5,000 off the cost of a brand new car (although the incentive can be higher) if you trade in an older vehicle, which usually must be more than seven years old.

If local authority scrappage schemes are launched, these are likely to be concentrated in areas of high pollution and used as a way to drive the oldest and most polluting cars off the road, improving air quality in the process.

It's a policy that has been championed by Edmund King, the AA president. "By offering an incentive to trade in an older car for a brand new one, then the government won't lose out," said King. "They will automatically get 20% VAT on every sale, which can almost pay for a scrappage scheme."

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How to avoid diesel taxes

Buy a petrol car

To state the obvious, the simplest way to avoid any diesel emissions taxes is to buy something other than a diesel car.

So far, many fewer petrol cars are affected by low emission zones, as their emissions are generally cleaner. They are generally cheaper than an equivalent diesel too. Most family-sized cars offer extremely economical petrol engines that come close to diesel levels of fuel economy.

When it comes to heavier cars, such as tall and chunky SUVs (sport utility vehicles), opting for a petrol engine is a good way of burning through your bank account at indecent speed. Unlike diesels, they need to work hard to get a big car moving, which uses up a lot of fuel.

If you want a big car that's not a diesel, then a hybrid SUV is a better bet. With a battery that can power the car for a few miles and recover energy that's normally lost during braking, they can be extremely economical on short journeys. Options include the smaller Toyota C-HR and Mitsubishi Outlander, to the larger Volvo XC90 T8.

Hybrids can be expensive, though and diesel makes more sense if you’re covering higher mileages. Because there are few realistic and affordable alternatives for most drivers who need a large vehicle, it's likely to mean that demand for these cars continues, so it's less likely (but not impossible) that prices will plunge.

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Lease or finance your next diesel car

One of the biggest concerns of diesel car owners is that the value of their cars could plummet if they are suddenly subject to punitive taxes. Anyone who leases a car or has taken out PCP finance does not need to worry, as those leasing a car have to return it at the end of the contract, while those with a car on PCP have the option of handing it back at the end of the agreement, no matter how much it has lost in value.

A big drop in value will reduce the options you have as a PCP customer, though. You could lose the opportunity to end your agreement early without penalty, and the car may not be worth enough to allow you to trade it in for a different model at a large discount. If you're happy with the monthly payments and save up a deposit alongside these for your next car, though, you should be in a good position to be able to afford payments on your next car, provided your situation remains stable.

Buy a diesel car with a Euro 6 engine

Diesel cars still make sense - particularly for drivers of larger, heavier vehicles, or those covering a high mileage, where the power and efficiency of these engines make them the ideal choice.

The latest emissions standards that every new car must comply with are called Euro 6. These require diesel engines to be considerably cleaner than the previous standard, known as Euro 5. Clean Air Zones are unlikely to impose charges on cars with Euro 6 engines, even though questions have been raised about how clean these vehicles really are (see below).

There’s no guarantee that Euro 6 cars will be exempt, but it is the policy that London is using for its Ultra Low Emissions Zone currently. The only diesel cars free to drive in the centre of the capital are Euro 6 vehicles (the rules are less stringent for petrol cars).

Every car registered since 1 September 2015 has had to be Euro 6 compliant by law. Some vehicles met the standard earlier than that. Newer cars usually have the emissions standard that they meet listed on their V5C registration document. Euro 6 diesel cars have an exhaust filter to trap particulates and often inject an additive called AdBlue into the exhaust, which reduces emissions of NOx.

Buy an electric car

The only new vehicles exempt from car tax are electric (and a handful of hydrogen-powered models). If your daily journey is typically less than 150 miles and you have somewhere that the car can be charged up overnight, then an electric car could be ideal - with minimal fuel costs.

The latest electric cars are capable of covering more than 300 miles per charge and come with rapid-charging options that make them faster to top up than older models. This means that while you may not have considered an electric model the last time you changed your car, as the options at the time may not have met your needs, things could be different this time around.

See our guide to electric cars for more information.

Avoid driving in built-up areas

It’s easier said than done if you only have one car, but the majority of proposed diesel taxes are designed to apply to polluted towns and cities, so if you don't drive through these, there's less chance of you being affected. There are no concrete plans yet to penalise diesel cars travelling on motorways, where their efficiency is greatest. Of course, there’s not much you can do if you’re travelling to a city that’s implementing a diesel tax.

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What’s wrong with diesel cars?

For years, diesel cars were presented as an environmental solution because they generally emit less carbon dioxide (CO2) for every mile that they travel than petrol cars do.

The more diesels that drivers bought, the closer the government would get to reducing emissions of this greenhouse gas to tackle global warming. So the government based car tax on CO2 emissions, with the Treasury consequently incentivising drivers to go diesel.

It was always known that diesel cars produce higher levels of other harmful emissions, including tiny soot fragments called particulates, which can embed themselves in lung tissue, as well as nitrogen oxide gases (NOx). That should have been addressed by regulations known as Euro 6 (see above). These rules were meant to make diesel cars as clean as petrol ones.

But faith in the Euro 6 regulations collapsed at around the same time when the Volkswagen ‘dieselgate’ scandal emerged. The German manufacturer had been cheating official emissions tests, which meant that its cars were producing higher levels of harmful compounds when they were driven on the road than in official tests, but were within legal limits when tested in the laboratory.

Further investigation found that the problem was not restricted to Volkswagen. On-road tests like in the image below revealed that most other manufacturers also produced diesel cars that emitted far higher levels of harmful particulates and NOx when on the road than in a laboratory.

Recent tests have discovered that some small diesel cars emit more pollution than some larger cars and even lorries. In these cases, no cheating was involved; the official European emissions test is simply not tough enough to replicate real-world conditions.

All of this coincided with increasing evidence that NOx and particulates were responsible for thousands of early deaths from respiratory illnesses each year. The Royal Colleges of Physicians and of Paediatrics and Child Health have claimed that outdoor air pollution contributes to around 40,000 early deaths per year in Britain.

Recent evidence suggests some brand new cars are increasingly clean in real-world conditions. This may be because NOx emissions are now being measured more thoroughly, with the introduction of a new official European test carried out on public roads.

But with increasing safety concerns and regular breaches of European air quality limits in several British cities, the scene is set for action that will penalise drivers of diesel cars, which were once seen as the green future.

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