Diesel tax: extra taxes and surcharges penalise owners

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

Dominic Tobin
Apr 17, 2018

Diesel car drivers have already been hit with surcharges on road tax, company car tax and even parking.

Now, as the government pushes to improve air quality, they face the prospect of being charged to drive in city centres, including London, Birmingham, Derby and Southampton. Councils are making plans to charge owners of the most polluting vehicles when they drive in congested areas.

In some regions, this is likely to include most diesel cars that are more than two-and-a-half years old, along with vans, buses and lorries. Newer cars will not be affected by these charges.

It’s no wonder that drivers are deserting the fuel. New diesel car sales in March were 37% down on the previous year, with 91,000 fewer cars registered.

Despite the extra taxes and charges, which will cost some drivers more than £50 extra each week, diesel could still make sense - particularly as prices are increasingly competitive. You can avoid many upcoming charges by getting a newer diesel that meets the latest emission standard, known as Euro 6. Every new car sold since September 2015 has had to comply with this.

The extra taxes and surcharges that have been introduced, or are expected, include:

  • Higher road tax and company car tax for diesel drivers Read more
  • Diesel car charges to drive in the centre of London Read more
  • Diesel charges in other cities 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 

The latest anti-diesel measures were introduced at the beginning of April, when the Chancellor introduced higher charges for company car users and new diesel car buyers.

Almost 3 million drivers are affected by the measures, which are expected to raise £195 million for the Treasury. The road tax increase pushes 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, drivers of many popular diesel cars will pay at least £350 more than last year.

  

 

The diesel crackdown is part of the government’s plan to improve air quality, which fails to meet legal limits in 81 different local authority areas. Michael Gove, the environment secretary, said that the plan will result in new conventional diesel and petrol cars being banned from sale by 2040. It's also rumoured to affect hybrid cars.

Gove has already encouraged diesel owners to abandon the fuel, saying, "We know people are moving away quite rightly from diesel cars at the moment."

However, the recent tax changes only impact buyers of the newest, cleanest brand new diesel vehicles, as well as company car users, who tend to drive newer models. Older diesels are unaffected by these measures.

Clean air zones are much more likely to affect older diesel cars. These are due to be set up from in parts of Birmingham, Leeds, Nottingham, Derby and Southampton. Leeds plans to charge lorries, taxis and buses to enter the zone. Other cities could impose a £10-a-day toll for anyone driving a diesel car that’s more than two years old.

More could follow, with up to 27 towns and cities identified by the government as requiring tough action on air quality.

Owners of newer diesel vehicles shouldn't be affected. All cars sold since September 2015 (and many sold before then) comply with Euro 6 emissions regulations, meeting limits on the level of toxic gases and particles in exhaust fumes, which are thought to contribute to more than 40,000 early deaths a year. At the moment, these are not being targeted by proposed Clean Air Zones.

Cities are following the lead of London, which has introduced a pollution charge for older cars that are driven into the centre of the capital. Stricter controls affected more recent cars sold up to September 2015 are due to come in next year when the city’s ultra-low emissions zone (ULEZ) is activated.

Other measures could include banning diesel cars from some major roads where air pollution exceeds legal limits, or increasing parking charges for diesels. Westminster Council in London is already imposing a £2.45 per hour parking surcharge on diesel cars that are over two years old. Since January, Islington has imposed a £2 per hour surcharge for all diesel cars in the borough's short-stay spaces.

Euro 6 diesel cars

 

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 discounts 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 guarantees that you won't have to foot the bill if your car is worth less than expected at the end of your agreement.

There’s still time to take advantage of a scrappage scheme, with some brands offering £2,000 or more on offer 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.

"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 April this year, 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 £145 a year to tax, compared with £125 for petrol cars. But those that emit between 131 and 150g/km, including many popular family models, face a first-year tax bill of £515, while the buyer of an equivalent petrol car would pay £205.

The increase is only limited to the first year that a car is taxed. In subsequent years, they will be subject to the same £140 flat rate as petrol versions.

As soon as the surcharge was introduced, car manufacturers increased the cost of new cars to reflect the change, adding more than £300 to the list price of popular family cars, including the Ford Kuga, Volkswagen Tiguan and Kia Sportage.

Company car drivers were penalised too: some VW Tiguan buyers now pay £350 more than last year. The benefit in kind rate (BIK - the value of the car that the tax is based on) is now 4% higher than for an equivalent petrol car, an increase on the previous difference of 3%.

The rise in diesel road tax and company car tax is temporary, as it will not apply to cars that meet next-generation emissions standards, due to come into force in 2021.

Manufacturers are expected to introduce the first of these compliant models earlier but the Society of Motor Manufacturers and Traders (SMMT) - the car industry trade body - warned that they aren’t imminent.
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Diesel car charges in London

T-Charge

The first emissions charge for cars was launched in London last October. This initial scheme, known as the Emissions Surcharge or ‘T-Charge’, targets all cars with an engine that fails to meet older emissions standards known as Euro 4, whether they are petrol or diesel. These are generally cars that are more than a decade old, registered in in 2005 or before.

Owners of affected cars have to pay £10 a day to drive in central London, in addition to the £11.50 Congestion Charge, making a total daily fee of £21.50. The charging zone is the same as the current Congestion Zone area and charges apply during the same hours: between 7am and 6pm, Monday to Friday. Historic cars that are 40 years’-old or more, don't have to pay. Anyone living in the zone gets a 90% discount, so only pays £1 a day.

See more details in the full guide to the T-Charge and ULEZ

Ultra Low Emission Zone (ULEZ)

The next stage of London’s emissions charges will begin in a year, when owners of diesel cars that fail to meet the very latest Euro 6 standards (most vehicles registered before September 2015) will have to pay £24 a day to drive in central London, made up of the £11.50 Congestion Charge and a £12.50 emissions surcharge.

The start date is scheduled to be April 8, 2019. Sadiq Khan, London's Mayor, has also proposed a vast extension of the charging area. It was initially going to cover the small central Congestion Zone area, but Khan wants to expand this to most of inner London, an area then times the size, by 2021.
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Other city diesel charges

By the end of 2020, there could be 27 Clean Air Zones in Britain, all 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)

Another possibility is that there will be just one - in London. That's because Michael Gove, the Environment Secretary, has said that he doesn't believe that it's necessary for polluted cities to cut emissions by charging the most polluting cars.

"Charging is a blunt instrument. I would rather use a series of surgical interventions because I think that’s fairer to drivers," said Gove. This means that authorities will be encouraged to remove speed bumps to improve traffic flow, introduce a local scrappage scheme or close roads to diesel cars before introducing charges. London's a different case, as its roads are controlled by the Mayor.

However, that doesn't mean that Clean Air Zones aren't a threat. Defra has said that cities with the worst-polluted roads outside of London are "well advanced" in their plans to put Clean Air Zones in place, in order to bring emissions below legal limits. Birmingham (above), Leeds, Nottingham, Southampton and Derby could decide to charge drivers from 2019.

These five cities could be joined by Manchester, Bristol and South Gloucestershire in 2020. They have been given grants to develop their own Clean Air Zone plans.

The measure may be needed because Defra's Air Quality Plan states: "The Government will require local authorities to implement measures that will achieve statutory limits in the shortest time possible."

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 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 in 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 the neighbouring borough, Camden. Merton, in South London is about to start charging diesel owners £90 a year. Owners of older diesel cars in Hammersmith and Fulham, West London, will have to pay £20 a year, rising to £60 each year over two years.
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Higher parking fees for diesel drivers

Parking surcharges for diesel cars have been spreading across London since they were introduced in the Marylebone area last summer. When rivers of diesel cars registered before 2015 tap in their registration to pay for parking by phone, they will be charged 50% more than From June 26, drivers of diesel cars that were registered before 2015 have had to pay more to park than the standard £4.90 per hour fee to park - that's a total of £7.35 an hour, or 12p per minute.

Westminster Council said that the scheme was being trialled in an area that it has "some of the highest pollution levels in London" and that it could be extended to other parts of the borough. It 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.
January, Islington imposed a £2 surcharge on all short-stay parking for diesel drivers. Again, the car is identified when drivers tap in their registration number when they pay by phone.
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Fines for driving in parts of East London

From July this year, most cars will be banned from driving down certain streets in East London during rush hour. It's part of effort to improve air quality in the polluted Old Street area.

There will be two zones, made up of five streets and cameras will enforce the ban. Only vehicles classed as Ultra Low Emission (ULEV) will be 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 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. Buying a diesel on some types of finance can also help protect against a sudden drop in value.

Should I buy a diesel car? Read our guide

If you own a diesel car that's going to be 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, but you've got until at least next before the charges are introduced. See below for your options.

It's likely that parts of Southampton, Birmingham, Leeds, Nottingham and Derby will make life more difficult for diesel drivers, 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 be 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 value for money, but car manufacturers have already started to act by launching their own scrappage schemes.

These typically offer £2,000 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 not to buy a diesel car.

So far, few 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 revving 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 (below) 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's no realistic alternative 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.

Petrol, hybrid & electric cars

 

     

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 they have the option of handing the car 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.

     

Buy a diesel car with a Euro 6 engine.

Diesel cars still make sense - particularly drivers of larger, heavier vehicles, or those covering a high-mileage, where the power and efficiency of these engines makes 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. The only diesel cars that'll be 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 September 1, 2015 has had to be Euro 6 compliant by law. Some vehicles met the standard a few months before then. 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

Since April 1, the only new vehicles exempt from car tax have been electric (and a handful of hydrogen-powered models). If your daily journey is typically less than 100 miles and you have somewhere that the car can be charged up overnight, then an electric car could be ideal - with minimal fuel costs.

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. There are no concrete plans yet to penalise diesel cars travelling on motorways, where their efficiency is most useful. 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. And because car tax was based on CO2 emissions, the Treasury incentivised drivers to buy 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). They 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, but were within legal limits when tested in the laboratory.

Further investigation found that the problem was not restricted to Volkswagen. On-road tests (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. 

Last year some small diesel cars were found to 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 last year said the outdoor air pollution contributed to around 40,000 early deaths 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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