Older cars to lose their tax exemption

The Government is scrapping the exemption for older cars from the highest rates of vehicle excise duty (VED).

The move could mean that many car owners have to pay up to 245 extra a year in road tax, after the Government decided to include cars up to seven years old (those bought after March 23, 2001) in the highest road tax band.

The increases will be introduced in two stages: owners who are now paying 210 a year will charged 300 from April 2009 and up to 455 in 2010.

In the 2006 Budget, Gordon Brown, the then Chancellor, said that no car registered before March 23, 2006, would have to pay the band G rate.

In last month's Budget, Chancellor Alistair Darling said he would begin a new system of 13 bands, from A to M, which will come into force next April.

He also said that there would be a showroom tax of up to 950 starting in April 2010.

However, although the Chancellor said that the changes would raise an additional 1.2 billion up to March 2011, he didn't say that some of this would be paid by owners of older cars who would lose their exemption.

A spokesman for the Treasury said: 'The Budget 2008 aims to ensure that there are appropriate and consistent VED signals across the road tax system to encourage the purchase of fuel-efficient vehicles - the more polluting the vehicle, the more VED it will incur.

'Cars emitting over 226g/km of CO2 bought before Budget 2006 will move into Band K in 2009/10, and will continue to benefit from a reduced rate. Only in 2010/11 will these cars be placed into the band that corresponds to the car's CO2 emissions.'