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Fuel duty ('fuel tax')
The main financial incentives that support green cars and fuels include: reduced fuel duty ('fuel tax') on most green fuels; reduced vehicle excise duty (VED or 'road tax') for cars with lower emissions; and London Congestion Charge discounts for the greenest cars.
Fuel duty Return to top
Fuel excise duty (fuel tax) incentives have been widely used by the UK government to reduce costs for green vehicle fuels. For example, the LPG vehicle market has been mainly driven by the low duty rates for gaseous fuels. Taking into account LPG's lower energy content and higher production costs, an LPG car's fuel costs are around 30% less than for a petrol car.
UK fuel excise duty and VAT rates (from 1st April 2009)
| Fuel type | Fuel duty | VAT Rate |
|---|---|---|
| Ultra-Low Sulphur Petrol | 54.2 p/litre | 15.0% |
| Ultra-Low Sulphur Diesel | 54.2 p/litre | 15.0% |
| Biodiesel used as a road fuel | 34.2 p/litre | 15.0% |
| Bioethanol used as a road fuel | 34.2 p/litre | 15.0% |
| LPG used as a road fuel | 24.8 p/kg | 15.0% |
| Natural gas used as a road fuel | 19.3 p/kg | 15.0% |
| Electricity | Zero | 5.0% |
Budget 2009 announced that fuel duty for petrol, diesel, bioethanol and biodiesel will increase by 2 p/litre on 1st September 2009, and by 1p per litre above indexation each year thereafter (on 1 April) from 2010 until 2013. The differential for LPG will be reduced by 1p per litre each year.
Useful websites and information
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VCA online calculator
To check the road tax band for particular models registered since 1st March 2001
http://www.vcacarfueldata.org.uk/ved -
Direct.gov vehicle taxing
Government website for information about vehicle tax for older vehicles
http://direct.gov.uk/Motoring -
Transport for London: Congestion charging exemptions
TFl's website for information on congestion charging
http://www.cclondon.com/exemptions.shtml