UK Could Raise £2bn by Taxing SUVs, Transport and Environment Report Finds

Takeaways

• A new study suggests taxing SUVs in line with European countries could raise nearly £2bn annually for the UK.
• Transport & Environment (T&E) is urging the government to impose a weight-based levy on large vehicles in the upcoming budget.
• Supporters say the tax would address environmental and infrastructure damage, while critics argue it could unfairly penalize families and EV adoption.

Taxing Britain’s SUVs in line with other European countries could raise almost £2bn a year for the Treasury, according to new research from the Transport & Environment (T&E) thinktank.

The group has called on the government to introduce a weight-based levy in the autumn budget, saying the current UK system allows heavier, more polluting vehicles to escape adequate taxation. SUVs now account for nearly 60% of new car registrations in the UK.

T&E argues that the so-called “SUV loophole” means UK buyers pay far less tax on large cars than drivers in other European countries. For example, vehicle tax on a new BMW X5 costs around £3,200 in the UK, while the same model would be taxed at about £66,600 in France. The lower UK rates have driven SUV sales to four times higher than in France, the report said.

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Across Europe, 13 countries impose acquisition taxes on large SUVs that are at least three times higher than those in Britain, though seven countries charge no such tax. Some UK reforms were made earlier this year to make more polluting vehicles pay more, but T&E believes the system still underestimates the true environmental and social costs of larger cars.

The thinktank has proposed a new levy of £10 per kilogram for cars weighing more than 1,600kg, with an extra 400kg allowance for battery electric vehicles. Most new SUVs sold in the UK are petrol, diesel, hybrid, or plug-in hybrid models, meaning the levy would largely apply to them.

The analysis shows such a tax could generate £1.72bn annually, with some high-end vehicles like the Land Rover Defender facing additional costs of over £10,000. However, T&E noted that optional extras already add similar amounts to the price of many cars.

Tim Dexter, T&E UK’s vehicles policy manager, said the measure would help address the government’s £50bn fiscal deficit while promoting fairer taxation. “A straightforward weight-based levy would make larger vehicles contribute fairly for the damage they cause to roads, safety and the environment, while protecting most family cars from added costs,” he said.

Campaigners have also highlighted safety risks, pointing out that bigger vehicles pose greater danger to pedestrians and cyclists and worsen congestion in already crowded streets. A YouGov poll earlier this year found that three in five UK car owners believe SUVs “take up too much space,” with fewer than one in five disagreeing, something T&E sees as public backing for reform.

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The car industry, however, has pushed back. Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said rising vehicle size reflected consumer demand, additional safety technology, and the need to house larger EV battery packs. He argued that higher charges could unfairly penalize families and create another obstacle to electric vehicle adoption.

As the government prepares its autumn budget, the debate over SUV taxation could become a flashpoint between environmental campaigners and the auto sector, already under pressure.

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Source: The Guardian