Rachel Reeves has introduced new vehicle tax bands, including a substantial £3,420 charge for certain drivers. These new tax bands apply to cars registered from April 2017 onward and have been confirmed by HM Treasury in collaboration with the Labour Party government.
One notable band targets vehicles emitting between 191 and 225 grams of CO2 per kilometer, imposing a hefty £3,420 tax on motorists. However, this isn’t the highest charge; there are two additional bands with even steeper rates of £4,850 and £5,690.
Furthermore, cars with a list price exceeding £40,000 (£50,000 for electric vehicles) are subject to an extra annual charge of £440, payable for five years. This five-year surcharge begins from the vehicle’s second year of registration.
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According to government guidance, “You’ll pay a rate based on a vehicle’s CO2 emissions the first time it’s registered. This also applies to some motorhomes.” Drivers of diesel cars that fail to meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions must also pay a higher rate. Car owners can verify their vehicle’s compliance with the RDE2 standards by consulting the manufacturer.
Vehicle Excise Duty (VED) must be paid at the time of vehicle registration, covering the first 12 months. Subsequently, vehicle tax can be renewed every six or twelve months, typically at a revised rate.
Vehicle Excise Duty has been part of the UK’s taxation landscape since the early 20th century, governed primarily by the Vehicle Excise and Registration (VERA) Act of 1994. VED rates are usually adjusted annually through the Finance Bill.
In the fiscal year 2024/25, VED revenue amounted to £8.2 billion. The Office for Budget Responsibility projects this figure will rise to £13.3 billion by 2030/31.
The amount payable in VED depends on several factors, including the vehicle type, its registration date, and environmental performance.