Budget 2017: Tax hike for diesel cars and new £220m Clean Air Fund

  The government is introducing a temporary levy on diesel cars in a bid to reduce air pollution. It is part of Chancellor Philip Hammond’s Budget announcement, which follows the […]

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By Priyanka Shrestha
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The government is introducing a temporary levy on diesel cars in a bid to reduce air pollution.

It is part of Chancellor Philip Hammond’s Budget announcement, which follows the government’s draft air quality plan earlier this year.

Under the new plans, from April 2018, Vehicle Excise Duty (VED) for diesel cars that don’t meet latest standards will go up one band in their first year – while a flat annual rate of £140 will be charged after that.

The diesel supplement on company car tax is also going up by 1% – which is expected to raise £70 million next year.

The Chancellor hopes the new measures will encourage manufacturers to bring the “next-generation of clean diesels” to market more quickly.

Neither charge will apply to next generation clean diesel cars that meet the Real Driving Emissions Step 2 standard. Drivers of high goods vehicles (HGVs) and petrol or ultra-low emission vehicles will also be unaffected by the changes as will those who have already bought a diesel car.

These measures are expected to benefit motorists by more than £4 billion over the next five years – “nearly nine times more than the changes to diesel taxation will raise for air quality”.

The government will use the money raised through these tax changes to pay for a new £220 million Clean Air Fund.

Local authorities in England with the “most challenging” pollution problems will be able to use the fund to support households and businesses to adapt as measures to improve air quality are implemented.

Guidance on applying to the fund will be issued early next year and funding will be available from 2018.

The Chancellor is scrapping the fuel duty rise for both petrol and diesel vehicles that is scheduled for April next year – expected to save a typical driver around £160 a year.

He has also pledged £540 million for EVs and charging infrastructure, announced a tax hike for diesel cars which will finance a new £220 million Clean Air Fund and is considering introducing a tax on single-use plastic items.