Chancellor announces diesel car tax hike and clean air fund

Taxes on diesel cars are set to increase from April 2018 the Chancellor of the Exchequer, Philip Hammond, has announced today (22 November) in his autumn Budget statement.

Funding has also been announced for local authorities to address air pollution in the form of a £220 million Clean Air Fund which will be available to local authorities to implement clean air proposals.

Chancellor Philip Hammond will be unveiling the government’s Budget on Wednesday

An initial £250 million ‘implementation fund’ has already been made available to councils implicated in the government’s Nitrogen Dioxide Plan, published in the summer.

Reading his statement in the Commons this afternoon, Mr Hammond said: “The tax system can play an important role in protecting our environment. We owe it to our children that the air they breathe is clean.

“We published our Air Quality plan earlier this year

“And we said then that we would fund it through taxes on new diesel cars

“From April 2018 the first year VED rate for diesel cars that don’t meet the latest standards will go up by one band.”

The existing diesel supplement in Company Car Tax will increase by 1%, Mr Hammond said, adding that drivers buying a new car will be able to avoid the charge “as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see.”

Documents outlining further details on the measures indicate that new diesel cars will go up one Vehicle Excise Duty band in their first-year rate – although the charge will not apply to ‘next-generation’ clean diesel cars that meet the Real Driving Emissions Step 2 standard.

Drivers of HGVs, vans and petrol or ULEV cars will be unaffected by the changes, the Treasury documents suggest.

However, the Chancellor has resisted calls to increase Fuel Duty, having announced that a planned rise for the tax rate for petrol and diesel, scheduled for April has been frozen.


Offering further details on the funding available for cleaner air, the Treasury has confirmed that its £220 million Clean Air Fund will be open to English local authorities with the “most challenging pollution problems”.

Councils will be able to use the fund to support people and businesses to adapt as measures to improve air quality are implemented, the Treasury has said.

A consultation is being launched today on some of the options that the fund could support, and will run until 5 January.

Guidance on applying to the Clean Air Fund will be issued early next year, alongside the consultation response. Funding will be available from 2018.


Support is being offered to the plug-in vehicle market, with government promising a new £400 million charging infrastructure fund, investing an extra £100 million in the Plug-In-Car Grant, and £40 million in charging research and development.

The Chancellor has also announced that he has written to Lord Adonis, who heads up the National Infrastructure Commission (NIC), about the need to “decarbonise freight” and reduce CO2 emissions. Lord Adonis, who chairs the NIC, is asked to carry out a freight study with a first report next autumn and the final version in spring 2019.

Mr Hammond told Lord Adonis: “Decarbonisation of freight is also imperative to meeting the Government’s targets on air quality and carbon emissions. Lorries cause a third of the UK’s transport CO2 emissions and simple new technologies may have a significant impact in reducing the harmful pollutants of freight. An increase in availability of low emission road vehicles has increased the possibility of low emission HGVs in the future, so it is important to consider what infrastructure may be required, alongside other approaches to decarbonisation.”


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