Price increases will hit drivers twice as hard

April 30, 2008 | By | In Statistics

Petrol costs will rise within days – road tax gs up, too.

Prices misery continued for drivers today. First came news that pump prices for petrol and diesel would rise by 2p per litre within days and a further 5p by the summer. Then it became clear that the Treasury was quietly abolishing exemption for older cars from the highest rates of road tax. As a result, owners of older cars with large engines will find that the cost of their tax disc will rise steeply from next April.

As Motors.co.uk reported yesterday, increases in the price of crude oil to reach record highs caused the rises. The price stands at $120 a barrel – a huge increase over 10 years ago, when it was just $10. And some industry experts predict that the price could reach $200 by the autumn, pushing pump prices up to £7 per gallon for unleaded.

Global demand and weakness of the US dollar on the world currency market are chief reasons for the rise. But the Government benefits whenever pump prices rise because VAT revenue increases. This and other taxes means the Treasury receives nearly 70p in every £ that motorists pay for fuel. For this reason, drivers’ and haulage industry groups have called for a planned 2p fuel duty increase to be halted.

The changes in road tax for cars came in last month's Budget, but its effects are only now becoming clear. It means that drivers of cars bought since March 2001 which emit 225g/km of carbon dioxide will see the cost of a year’s road tax increase from £210 to £300 next April, and up to £455 by 2010. Drivers of medium sized cars that emit more than 180g/km of CO2 will find road tax rising by up to £100.

Vehicles registered before March 2001 escape all but modest increases, because CO2 data for them is incomplete. The rate for such cars with engines smaller than 1550cc rose this year by just £5 to £120, while the rate for bigger-engined models is now £185 (up from £180).

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