Motoring taxation in the United Kingdom

Motoring-related taxes for fiscal year 2011/12, including fuel duties and VED, are estimated to amount to more than £38 billion, representing almost 7% of total UK taxation.

[4] A new duty was introduced in 1909 on "motor spirit" (imported petrol), leaving alternative fuels duty-free.

This addressed a perception that the free use of roads was unfairly subsidising the railway's competitors, through the introduction of an additional axle weight duty within the VED in order to charge commercial motor vehicles for the costs they generated.

It was accompanied by changes in legislation that relieved local authorities of some of their costs through new abilities to set weight and speed limits.

The policy was retained by the incoming Labour government in 1997 and was withdrawn after the fuel protests of 2000.

[14] Since 2002 policy cues have been given using the income tax system to encourage the purchase of company and personal cars with low emissions.

[18] In spite of these protests, the country's economy and motorists' behaviour has generally become less sensitive to the price of fuel at the pump, with economists now[when?]

VED was introduced in the 1888 budget; the current system, which applies specifically to motor vehicles was introduced in 1920 and was initially paid directly into the Road Fund which was ring-fenced for road construction until 1937, after which time it was treated as general taxation.

[24] Since 1999,[25] the duty has been levied according to the CO2 emissions, starting with a reduced rate of £50,[25] the scheme was extended into a graded system in 2001.

In addition, the taxable allowance for mileage using private cars has remained static.

Similarly to vehicle excise duty (VED), it would be based on emissions of carbon dioxide in grams/km.

This would reduce or eliminate the charge for small and fuel-efficient vehicles, and increase it to up to £25 a day for large, inefficient vehicles such as SUVs, large saloons and compact MPVs with a Band G VED rating, that is, emissions of > 225 g/km of CO2.

[43] Under the Transport Act 2000, local traffic authorities in England and Wales, outside London, may introduce a Workplace Parking Levy (WPL) to help tackle congestion in towns and cities.

The council have used the revenue of around £10 million a year to develop the city's tram system.

[47] A 2012 study by the Institute for Fiscal Studies (IFS) funded by the RAC Foundation found that the government's drive to promote green vehicles with a lower carbon footprint could result in a significant loss of revenue from motoring taxes, estimated at £13 billion by 2029 at current prices, according to forecasts by the Office for Budget Responsibility.

Among the options available to the government to offset the loss, a further increase of the duty on petrol and diesel or the introduction of new taxes on alternative energy sources such as electricity for vehicles were considered.

However, due to lack of popularity of the former and the risks of hindering the entire green vehicle strategy, the IFS study recommended to introduce a nationwide system of road pricing to charge drivers by each mile driven, with higher pricing in congested areas at peak times, while reducing the existing motoring taxes.

Under this strategy drivers in the countryside would be likely to pay less, as rural motorists are currently overtaxed according to the study.