As part of the Government’s efforts to combat air pollution and tackle climate change, it is trying to hasten the rise of ultra-low emission vehicles, with a number of policies to incentivise people to drive them. But just like the technology inside these vehicles, the policies around them are moving quickly. It can be hard to keep up. That’s why we’ve put together this summary of current policies and what to expect in the near future.
Plug-in vehicle grants
Since 2011, the Government has offered grants towards the cost of purchasing plug-in cars. Originally, these were worth £5,000 off any electric car, but in March 2016 the Government reduced their value
The grants are now worth 35 per cent of the price tag, up to a maximum that depends on just how ultra-low the ultra-low emission car is. The cleanest cars – ones that can run for 70 miles or more with zero emissions – attract grants of up to £4,500. For other plug-in cars, the maximum is £2,500.
In March, the Government said it would maintain the grants at these levels until March 2017, or until a certain number had been awarded – whichever comes first. We’ll have to wait, possibly until Philip Hammond’s Autumn Statement in November, or until his first Budget next March, to learn its future beyond that.
The Government also offers a grant towards a plug-in van, giving buyers 20 per cent off the cost up to a maximum of £8,000.
Vehicle Excise Duty
A new Vehicle Excise Duty system will come into effect next April, designed to incentivise lower emission cars. Those with the highest carbon dioxide emissions will be subject to a £2,000 duty in their first year, while ultra-low emission cars will only have to pay £10 or £25. After the car’s first year, the duty will be £140 a year regardless of emissions, except for cars with no CO2 emissions at all, which will be exempt from VED entirely.
Company car tax
The Government is also incentivising greener company cars, through benefit-in-kind (BIK) tax rates that are – like VED – tied to CO2 emissions. Company cars with the lowest emissions are currently subject to a 7 per cent BIK rate, while those with the highest must pay 37 per cent.
That gap will close somewhat over the next three years, as the rate for the cleanest cars rises to 16 per cent but the top rate remains 37 per cent. However, more high emission cars will be caught in that 37 per cent band, as the cut off for it falls from 200 gCO2/km to 165 gCO2/km.
Budget and BIK
In his final Budget, George Osborne didn’t set out what BIK rates will be after 2019-20, though he did say he planned to continue linking them to CO2 emissions. Instead, he announced a review of BIK rates for ultra-low emission vehicles to ‘refocus incentives on the cleanest cars’.
Though Osborne was replaced as Chancellor, the Treasury is pressing ahead with that review. It launched a public consultation on the new system last month, which is open until 19 October. You can read the consultation document, including details of how to respond, here.
London’s Ultra-Low Emission Zone
To tackle air pollution in the nation’s capital, a Low Emission Zone was introduced in 2008, covering almost all of Greater London. The most polluting vans must pay £100 per day to drive within it, while the most polluting lorries must pay £200 a day.
Since his election as Mayor of London in May, Sadiq Khan has prioritised the introduction of an Ultra-Low Emission Zone. This was already planned for introduction in 2020, but Khan has moved it forward to 2019 and enlarged the area it will eventually cover.
Initially, the Zone will cover the same area as the existing Congestion Charge Zone, but in 2020 it will be extended to the North and South Circular Roads. Once it comes into effect, cars and vans in the Zone that do not meet its emission standards will have to pay a £12.50-a-day charge.
Even before then, the most polluting cars driving in the Congestion Charge Zone will face a new ‘Emissions Surcharge’ of £10 per day, which will be in force from next year until the Ultra-Low Emission Zone comes into effect.
Go Ultra Low cities
With Government support, other cities are experimenting with measures to encourage drivers to switch to electric cars. In January, the Government awarded multi-million-pound grants to Bristol, Milton Keynes and Nottinghamshire and Derby to implement policies such as: free parking for electric cars, allowing low emission vehicles to use bus lanes and giving drivers the chance to try an electric car before they buy one.
As the electric car market continues to change rapidly, many of these policies will likely change too – and there may be new ones to come. After all, we have yet to discover what our new Prime Minister, her Chancellor and Transport Secretary’s approach to incentivising ultra-low emission vehicles will be. Stay tuned.
And don’t forget, Government incentives are far from the only reason to choose ultra-low emission vehicles. We put together an e-book on why a green fleet is a smart choice, which you can read here.