UK a ‘tax haven’ for polluting SUVs, says green…

UK a ‘tax haven’ for polluting SUVs, says green thinktank

BMW X5 being driven on a city street — The BMW X5 is among the large SUVs with a low vehicle excise duty in the UK compared with other countries in Europe. Photograph: Tony Vingerhoets/Alamy

Low taxation on petrol SUVs in the UK compared with much of Europe is inviting a glut of large, polluting luxury cars, according to an analysis by a green thinktank.

The tax paid when buying a new petrol or diesel SUV in the UK is only a fraction of the levies in neighbouring countries, including France and the Netherlands, and lower than many others in Europe, making it a “tax haven” for the bigger, less environmentally friendly vehicles, the report from Transport & Environment (T&E) found.

Britain’s first-year vehicle excise duty (VED) charge does relatively little to incentivise the purchase of less damaging cars, with the difference in buying a petrol SUV or a battery electric equivalent smaller in the UK than under most of Europe’s comparable acquisition taxes.

The first-year VED for a medium-large SUV, such as the BMW X5, costs £1,565 in the UK compared with a €60,000 (£51,400) tax in France, which also has a further surcharge on heavier cars.

Car sales figures from last year showed higher-polluting vehicles had a vastly bigger market share in the UK than across the Channel. Car widths in the UK now outstrip the average sizes in most of Europe, T&E added, bigger than the minimum on-street parking space.

Vehicles emitting between 160g CO₂/km and 199g CO₂/km were 9.3% of private registrations, while cars with emissions above 200g CO₂/km took another 6.1%. In France, new cars in the same bands were just 0.7% of sales.

While there are incentives for company cars to be fully electric in the UK, the tax incentives for other owners to go green are diminishing, with the government planning to introduce annual VED for electric vehicles from 2025, a measure announced in Jeremy Hunt’s 2022 autumn budget.

Before next week’s budget, T&E urged the UK to revise its tax system to discourage the growth of new SUV sales, which grew 23% in 2023, including increasing the initial VED paid on the purchase of the most polluting cars and introducing a new weight-based element to the tax to target the heaviest cars.

Ralph Palmer, T&E’s UK electric vehicle and fleets officer, said: “The UK government is missing out on an equitable and easily actionable source of revenue by not targeting wealthy buyers of oversized, over-polluting SUVs.

“The result is that the UK risks becoming a tax haven for larger and more polluting cars, despite the harm they cause to the environment and other road users.

“Bringing the UK’s taxes on larger, luxury, more polluting cars more in line with other European countries will help make green alternatives more appealing to new car buyers.”

A government spokesperson said: “We want all new cars and vans to be zero emissions by 2035. We have already invested over £2bn to support this transition.

“Since 2017, the number of new EV registrations per year has increased by 1,730%, and sales of used pure electric cars have reached a record high.”

Other tax measures in the UK include a higher supplementary rate in subsequent years for vehicles costing £40,000 or more, as well as fuel duty on petrol and diesel.