UK could raise nearly £2bn by taxing SUVs in line with European countries, study shows
Thinktank says an ‘SUV loophole’ means UK buyers pay up to 20 times less tax on biggest models than in neighbouring nations
Taxing Britain’s SUVs in line with other European countries could raise almost £2bn a year for the public finances, research has shown.
The Transport & Environment thinktank has urged the government to use the autumn budget to bring in a levy on the largest vehicles, which it said would reflect the damage they caused to the environment and infrastructure.
T&E said the current UK vehicle tax system was not keeping up with the change in the profile of cars sold, with heavier and more polluting cars escaping adequate taxation and coming to dominate the market.
An “SUV loophole” meant UK buyers paid up to 20 times less tax on the biggest models than counterparts in other European countries, it said. Vehicle tax on a new £85,000 BMW X5 would amount to £3,200 in the UK, but the sale would incur taxes of £66,600 in France – driving UK SUV sales to four times the level in France.
In 13 countries, acquisition taxes for such an SUV are more than three times higher than the UK’s, although seven impose no tax. Some changes to UK vehicle excise duty rates were made in April to make more polluting cars pay more.
But the thinktank argues that the system, based on lab-tested carbon emissions, underprices the actual pollution as well as wider costs of bigger cars. It proposes an additional tax of £10 a kilogram for vehicles above a threshold of 1,600kg, with a further 400kg allowance for cleaner – but often heavier – battery electric cars. Most new SUVs remain petrol, diesel, hybrid, or plug-in hybrid vehicles.
According to T&E’s analysis, with SUVs accounting for almost 60% of new registrations, a large vehicle levy would currently bring in £1.72bn a year.
The tax would add more than £10,000 to the cost of some vehicles, such as a Land Rover Defender, but the report argued that the cost of optional extras could already inflate the purchase price by a similar amount.
Tim Dexter, T&E UK’s vehicles policy manager, said the measure was a simple way to help tackle the £50bn fiscal deficit in the November budget: “A straightforward weight-based levy would make larger vehicles contribute fairly for the damage they cause to roads, safety and the environment, while protecting most family cars from added costs.”
Campaigners have highlighted the increased safety risk bigger cars pose to pedestrians and cyclists, and the effects on congested streets from a million new cars a year in the UK that are now bigger than a typical parking space.
after newsletter promotion
According to YouGov polling conducted earlier this year, about three in five UK car owners now believe SUVs “take up too much space”, and less than one in five disagree, which T&E said was a mandate for change.
For the car industry, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said: “Cars have, on average, increased in size over the years to reflect changing [consumer] preferences but also the need to accommodate vastly increased safety technology – as well as, most recently, new technologies such as large battery packs to deliver the range drivers expect.
“Charging more for heavier cars would unfairly penalise drivers and families who require a bigger vehicle for essential mobility and act as another barrier to EV uptake when the market is already under immense pressure.”