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Last Updated: Wednesday, 12 March 2008, 16:45 GMT
Q&A: Showroom tax
Car showroom
"Cleaner" cars have to be financially beneficial, the government says.

What are the details of the so-called "showroom tax"?

From April next year, the drivers of the most polluting cars will pay vehicle excise duty of 440.

Then from April 2010, people buying new models that are the most polluting will pay vehicle excise duty of 950 in their first year of owning the vehicle.

After that they will then pay vehicle excise duty of 455 per year.

Those buying vehicles classed as the second-most polluting, will pay 750 in the first year and 430 per year thereafter.

How do I know if my car is classed as "most polluting"?

From next year, vehicles will be put in one of six new bands.


The top band - band M - will be for those vehicles which emit more than 255g of carbon dioxide per kilometre (CO2/km) driven.

The second-highest band - Band L - is for cars emitting between 226g and 255g of CO2/km.

How does this compare with the situation now?

Currently, cars emitting more than 225g of CO2/km pay 400 a year in vehicle excise duty - though there is no one-off higher first year charge.

Is it only the most polluting cars which face the showroom tax?

No. All cars classed in the current bands E and F - which produce between 166g and 226g of CO2/km will also have to pay a higher rate in the first year.

This will range from 250 to 550 in the first year and from 180 to 310 thereafter, depending on the extent of CO2 emissions.

What if I have a relatively "clean" car?

In 2009-10, the standard rate of vehicle excise duty will be cut for all new and existing cars which emit less than 150g of CO2/km

From 2010-11 the owners of cars emitting less than 130g CO2/km will pay no vehicle excise duty.

Cars fuelled on alternative fuels, such as bio fuels, will get a tax discount of between 15 and 20 in 2009-10 and 10

Why are the changes coming into play?

The government says that motorists should be helped to see that a "cleaner" car is good for their bank balance as well as the environment.

A report published alongside the Budget by Professor Julia King calls for the lifetime costs of running a car to be prominently displayed in the showroom.

It also recommends a colour-coded road tax disc dependent on emissions levels.

Is it all being done for the good of the environment?

There is a financial implication.

Changes to vehicle excise duty, extracting more from owners of gas-guzzlers, is forecast to raise 465m in 2009-10 and 735m in 2010-11.

CBI director-general Richard Lambert said that the amount of money which the policy would generate would "not build confidence in the government's green measures".

"We need carrots as wel as sticks to change behaviour," he said.

Reaction from a car dealer and buyer

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