Drivers could see an increase in motoring costs this year as the government pushes to balance the economy and lessen the environmental impact of motor vehicles.

A number of new laws will be implemented from March onwards, including a purchase tax specifically targeted at new petrol and diesel owners, and fuel duty and vehicle excess duty could increase in price.

Nationwide Vehicle Contracts have gathered together some of the proposed new changes, and the predicted impact on road users throughout 2021.

Failure to follow the upcoming rules may lead to drivers being slapped with fines or penalty points.

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Fuel duty increase

Boris Johnson previously promised he had “no intention” to raise fuel duty ahead of the 2019 election, but there are rumours that after a ten-year freeze, fuel duty could rise by between 1-2p in the Chancellor’s next budget.

This would raise the cost of driving for almost everyone.

Successive freezes since 2011 are thought to have cost the Treasury over £100billion, but the predicted rise from 57.95p to 58.95p or 59.95p, could raise between £250 to £470million.

Increasing Vehicle Excise Duty (VED)

Petrol and diesel cars may set people back up to £155 per year in 2021

VED increasing is nothing new, with vehicle excise duty rising year by year, normally rising with inflation, which as of January 2021 was 0.7%.

While there’s no reason why 2021 would be any different, and we won’t know for certain of this year's rise until the announcement of the budget in March, if the rise repeats last year's interest we could see an increase of up to £10 for older vehicles.

This means that petrol and diesel cars may set people back up to £155 per year in 2021.

Scrapping VED in favour of ‘Pay per Mile’ road pricing

Another proposed tax change the Chancellor is understood to be considering is, instead of raising Vehicle Excise Duty (VED), simply scrapping VED and fuel duty costs in order to introduce a ‘Pay per Mile’ road pricing charge.

This would see drivers pay based on how many miles they completed on their journey rather than based on fuel type.

One reason for this particular change could be such a tax would mean that electric cars would be eligible for taxation. Electric vehicles are currently exempt from Vehicle Excise Duty car tax as the VED is based on emissions levels.

This exemption led to a £40billion budget black hole, a hole this proposal would fill. However, as with a fuel duty increase, such a change would invariably hit low-income earners the hardest.

Purchase tax on new petrol and diesel vehicles

In an attempt to become more green, the UK Energy Research Centre (UKERC) have proposed a new purchase tax specifically targeted at new petrol and diesel owners.

The tax would be aimed at those with less environmentally-friendly vehicles in order to make the purchase of eco-friendly vehicles a more inviting proposition financially.

The tax would affect those who were buying vehicles that emitted more than 225gCO2/km.

These drivers would be targeted and made to pay a 50% purchase tax from this year, which would increase in instalments each year until only fully-electric models were exempt by 2030.

'Benefit in Kind' rates are back

Changes are targeted at petrol and disease car users

Back in March of last year, Benefit in Kind (BiK) rates were scrapped completely to encourage people to use electric cars.

But they’re now back and as of April drivers may have to pay as much as £390 per year to use their vehicles due to BiKs reintroduction.

A 1% charge, based on income rates and vehicle value, could find many drivers with zero-emission models caught out, a charge that will likely increase to 2% in 2022.

However, BiK rates are still way below what they were back in 2019 when they were at 16%.

Local clean air zone charges which may offer a glimpse into a national future

While not being rolled out nationally, there are a number of local changes which may be a glimpse of things that could be rolled out nationally in the future.

Extension of the London driving charge

An outer London borough charge is also being considered which would charge drivers £3.50 a day to enter the outer boroughs.

This would extend the cost of driving in the capital from the central zones covered by the London congestion charge, to the whole of Greater London.