UK Could Generate Nearly £2bn Annually by Taxing SUVs, New Study Reveals

Published: 16 September ‘2025. The English Chronicle Desk

The UK has the potential to raise close to £2 billion annually by introducing a tax on sport utility vehicles (SUVs) aligned with rates in other European countries, according to a recent study by the Transport & Environment (T&E) thinktank. The organisation has urged the government to use the upcoming autumn budget to implement a levy targeting the largest and heaviest vehicles, arguing that it would reflect the environmental and infrastructural harm these vehicles cause.

T&E highlighted that the current vehicle taxation system in the UK has not kept pace with changes in the car market. Heavier and more polluting vehicles are largely escaping proportional taxation, enabling them to dominate the roads. An “SUV loophole” allows UK buyers to pay substantially less than their European counterparts for large models, incentivising higher SUV sales. For instance, a new £85,000 BMW X5 would incur £3,200 in tax in the UK, compared with £66,600 in France. This discrepancy has driven UK SUV sales to four times the level seen in France.

Across 13 European countries, acquisition taxes on similar SUVs are more than three times higher than in the UK, though seven nations impose no tax at all. Some adjustments to the UK’s vehicle excise duty were introduced in April to make higher-polluting cars pay more. However, T&E argues that these measures, which are based on lab-tested carbon emissions, still underestimate the true environmental impact and wider societal costs associated with larger vehicles.

The thinktank has proposed a weight-based levy, applying an additional £10 per kilogram for vehicles above 1,600 kilograms, with an extra 400-kilogram allowance for heavier battery electric vehicles. Given that SUVs account for nearly 60% of new car registrations in the UK, this measure could raise approximately £1.72 billion annually under current market conditions.

While the proposed levy could add more than £10,000 to the cost of some vehicles, such as a Land Rover Defender, T&E noted that many optional extras already inflate vehicle prices by a similar amount. Tim Dexter, T&E UK’s vehicles policy manager, said the policy represents a simple and effective method to help address the UK’s £50 billion fiscal deficit: “A straightforward weight-based levy would ensure that larger vehicles contribute fairly for the damage they cause to roads, safety, and the environment, while protecting most family cars from additional costs.”

Public opinion appears to support the initiative, with recent YouGov polling indicating that about three in five UK car owners believe SUVs occupy too much space, while fewer than one in five disagreed.

However, the car industry has raised concerns about the proposal. Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, emphasised that vehicles have grown in size to accommodate evolving consumer preferences, enhanced safety features, and new technologies such as larger battery packs for electric vehicles. He warned that a levy on heavier cars could unfairly penalise families requiring larger vehicles and potentially hinder the adoption of electric vehicles in an already stressed market.

The study underscores a growing debate over the balance between consumer choice, environmental responsibility, and fiscal policy, placing the government at the center of discussions on how to shape the future of vehicle taxation in the UK.