Along with other measures to improve air quality, Chancellor Philip Hammond introduced a VED supplement that will apply to new diesel cars first registered from 1 April 2018, so that their first-year rate will be calculated as if they were in the VED band above.

This charge will not apply to next-generation clean diesels which are certified as meeting emissions limits in real driving conditions, known as Real Driving Emissions Step 2 (RDE2) standards.

The measure is expected to raise £125m in 2018-9, dropping to £50m in 2019-20 and £10m in 2020-21.

The higher VED rate could add up to £300 a year on the first year rate of car tax. For example to currently tax a car which emits 131-150g/km of CO2 individuals would pay £200 for the first year, but under the new tax rules they will now have to pay £500. 

Graham Hill, car finance expert, said: 'It's hard to see whether the Chancellor's further squeeze on diesel drivers is out of genuine concern for the environment or just a way to increase revenues from already overtaxed motorists.

'The announcement of a first year VED rate hike on new diesel cars from April next year is designed to sidestep headline-grabbing increases on other motor vehicles like vans, but it still adds to the negative narrative that is talking the automotive market down.

'In the run-up to the Budget, new and used car sales of diesels have suffered significantly - which has had a wider effect on the new car market as customers hold off on purchases in the hope that values recover. At this rate, we risk talking the car market into serious trouble.'

Report by Amy Austin