If you picked up any newspaper today, you cannot miss the current furore over road tax and fuel duty. If current proposals go ahead then many families will face heavy car tax increases up to Â£245 per annum if their car was bought before March 2001 and emits more than 225g of carbon dioxide per kilometere. The steep increase in car tax will hit next April and payments could total upto Â£430 by 2010. That's an increase of more than 100% compared to the Â£200 most people pay today. Newer cars are also affected but it is the retrospective nature of the tax which is particularly unfair. After all, anyone buying a car years ago could not know these tax hikes were around the corner. What's more, the second hand car market is seriously affected with many vehicles plummeting in value creating a vicious negative equity trap, where a car is worth less than the outstanding loan against it, is developing.
The good news is that more than 30 Labour back-benchers, presumably thinking of the recent 10p tax situation, have urged ministers to rethink proposals before the new taxes come into action. Spiralling petrol prices see further pressure on the government to also cancel the 2p fuel duty rise due to be implemented later this year. Yesterday's lorry drivers' protest shows no sign of abating as they fear going out of business without receiving an 'essential user discount' on fuel tax such as currently enjoyed by bus companies.
Alistair Darling introduced the new system of thirteen vehicle excise duty bands, from A to M, and it is due to come into force next April. The scheme is anticipated to raise an additional Â£1.2 billion for the treasury but it was not initially clear that a great portion of this will be paid by owners of older cars, who are often hard-pressed anyway.
What do you think about this new system? How will you be affected? Let us know.