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British car taxes

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There are two main British vehicle taxes. There is the Vehicle Excise Duty which is more general and applies to vehicles driven in the UK. Congestion charges are more specific and only apply to major cities, such as London [1].

Vehicle Excise Duty[edit]

The Vehicle Excise Duty (VED)[2] was changed in the late 1990s for the purpose of protecting the environment and promoting cleaner vehicles. Vehicle Excise Duties are paid for each car a person owns. Hybrids and other less-polluting cars have lower costs.

Congestion Charges[edit]

Congestion charges apply to the major cities and each city has its own charges. For example, London charges 8 pounds per day between the hours of 7 am and 6 pm, Monday through Friday. The charge is increased to 10 pounds if it is paid the next day [3]. There is also a charge for parking. Vehicles that create more CO2 cost more to park [4]. Vehicles that create more CO2 are charged more for the congestion tax [5].


The Congestion Charges were created to reduce traffic in major cities in the UK. It is estimated that drivers in London spend half their time stuck in traffic [6]. The Vehicle Excise Tax was created to reduce pollution from vehicles and to discourage the use of SUVs. Both taxes were designed to generate revenue for the government. A more long-term goal is to decrease CO2 emissions by 60% by the year 2050 [7].


It was estimated by the Richmond Council that the congestion charges could reduce CO2 emissions by 15% [8]. Automobile traffic dropped 30% and the use of buses and taxis increased 20%. Overall traffic was reduced by 18% [9]. Due to the number of evaded vehicles (vehicles that were unlicensed), approximately 49 million pounds ($81 million US) in revenue was lost [10].

Even though the taxes on SUVs were higher, there were 187 thousand SUVs sold in 2005, which was a record for the number of SUVs sold [11].

From a 2006 Transport for London report [12]:

  • During the fiscal year between 2005 and 2006, a net revenue of 122 million pounds was accumulated.
  • There was an estimated 20% drop in CO2 emissions from traffic.
  • The numbers of traffic accidents have decreased 10-15% (depending on time of day) since the charges were put into effect.


Prius owners don't pay congestion charges and receive a subsidy of 1000 pounds ($1657 US) [13]. Drivers of less-polluting cars are allowed to park for free [14]. All hybrids are excluded from paying congestion charges, regardless of vehicle type [15].

There are times when drivers don't have to pay the charges to drive. These are mostly during times when drivers aren't trying to get to work. These include major holidays, such as Christmas, Easter, and Good Friday, on weekends, and between 6 pm and 7 am [16].

Apparently, quite a few large luxury vehicles have been registered as minicabs in London in order to avoid paying congestion charges [17].

Public Opinion[edit]

  • One person feels that there should be a reward for drivers who don't drive a Prius, but an SUV, who carpools with more people than can safely fit in a Prius. This person also feels that these charges are punishing drivers who live farther away from big cities and must drive to work [18].
  • Serge Lourie, who is the leader of the Richmond Council, believes that these charges should stay. He believes that climate change is real and that we need to do something about it. If drivers are discouraged from buying SUVs, CO2 emissions will decrease [19].
  • At least one person believes that manufacturing one Prius does more damage to the environment than driving an H3, even if the H3 causes more pollution from driving [20].
  • John Redwood thinks that the Vehicle Excise Duty should be replaced with toll booths. Drivers that drive more will pay more, but drivers who drive less often will pay less [21].