Road Tax change U-Turn expected in Pre-Budget Report

Controversial road tax plans - due to come into force in March 2009 - could be abandoned as part of a tax shake-up next week.

The Government has signalled that changes to the road tax system could be postponed as part of a wide package of tax cuts to be announced in the Chancellor's Pre-Budget Report.

It's expected that the introduction of the new system on cars registered between 2001 and 2006 will be delayed by at least 12 months. It will bring much-needed relief to families recovering from a Summer of escalating costs.

The radical change to the road tax system was announced in this year's Budget . It would have seen, from March 2009, the cost of an annual tax disc for some popular family cars rise by more than £240 per year. Others would have been made worthless. It is thought that the Chancellor will drop the changes that affect owners of cars registered up to 2006, but still levy the new tax rates on cars registered after this date.

Although the proposed change to the road tax system offers an incentive for drivers to down-size to smaller and more efficient cars, it disproportionately penalises owners of larger and older cars - many of whom are on low incomes.

The new road tax system has proved unpopular with users of parkers.co.uk. In a recent Parker's survey eight-out-of-ten car buyers said they were confused about the upcoming changes, while others have likened it to a 'Poll Tax on wheels'.

Despite the Government's previous claims that the new road tax system helps the environment by punishing drivers of cars with high CO2 emissions, the Environmental Transport Association (ETA) disagrees.

It blames the retrospective aspect of the road tax proposals for causing most of the problems. 

"Higher polluting cars should face some form of punitive taxation, but it is vital that green taxes are seen as well thought through and fair," Andrew Davis, ETA Director, said. "It’s questionable whether such a sharply-increased retrospective tax will ever be seen in that way."

The ETA says that a better alternative would be the introduction of national road user charging to cut both congestion and emissions.

• Read what's changing
• See how the tax changes will affect families
• Who loses out from the changes?