The UK Chancellor of the Exchequer George Osborne has revealed that road taxes on luxury cars and eco-friendly hybrids will be increased in order to fund major roads building programme.

In the last Parliament, the UK Government had increased road spending and set out a plan for £15bn of new roads for the rest of this decade.

Vehicle Excise Duty (VED) was used to fund the country’s roads and because so many new cars now fall into the low-carbon emission bands, and by 2017 more than three quarters of new cars will pay no VED at all in the first year.

Osborne noted that a long-term solution was required in order to fix Britain’s poor roads.

"In his Summer Budget 2015 speech, the chancellor noted that new VED bands will be introduced for brand new cars only."

In his Summer Budget 2015 speech, the chancellor noted that new VED bands will be introduced for brand new cars only.

From 2017, VED will be charged at a flat rate of £140 a year for most cars, except in the first year when tax will remain linked to the CO2 emissions that cars produce.

KPMG UK head of transport James Stamp said: "In the last budget, the government announced a major road investment programme worth £15bn.

"Today, the Chancellor announced that road tax (VED) income will be ‘ring fenced’. This provides some clarity about where funding for the ambitious road projects will be found.

"However, we note that while road tax raises around £6bn per year, this is dwarfed by income collected from fuel duty which is around £27bn.

"We believe that more of this income should be reinvested in roads and transport infrastructure in line with the Chancellor’s statement that money raised from drivers should be spent on the roads they drive on."

For cars registered after April 2017, VED will be transformed into three bands namely, zero, standard and premium.

According to the Chancellor, electric cars will not have to pay any road tax at all and the most expensive cars will pay more, while the existing cars won’t be affected.

Osborne further noted that: "From the end of this decade, every single penny raised in Vehicle Excise Duty in England will go into that fund to pay for the sustained investment our roads so badly need."

The money brought in from road tax in England will be invested on England’s roads from 2020.