Vehicle Excise Duty ('road tax')

Road tax - March 2008 to 2009Return to top

While not a major cost for cars, vehicle excise duty ('road tax') for cars registered since 1st March 2001 is dependent upon the fuel type and the level of CO2 emissions. Through the use of separate rates for petrol, diesel and green fuels, the rates also reflect levels of regulated emissions. The following table shows the current Vehicle Excise Duty rates that apply to light-duty vehicles.

12-month VED rates for cars registered since 1st March 2001*

*For cars registered before March 2001, the VED rates are charged according to engine size - £120 up to 1550cc and £185 for larger engine sizes. **For cars registered on or after 23rd March 2006.

Road tax - April 2009 to 2011Return to top

From 1st April next year (2009), VED will be totally restructured with 13 new bands (A to M) replacing the current 7-band (A to G) system. VED will still be based on CO2, and band A will continue to apply to all cars with CO2-emissions of up to 100 gCO2/km, but most bands will be narrower (bands B to I will only be 10 gCO2/km wide). The highest band M will apply to cars with emissions of over 255 gCO2/km (currently the highest band applies to cars with over 225 gCO2/km).

The Government's intention is that the link between road tax and CO2 emissions will be strengthened, so making a small change in car emissions have a greater financial impact. The scale of charges for 2009-10 has been adjusted to reduce the 'standard rate' of VED for all new and existing cars with emissions up to 150 gCO2/km, and to increase the standard rate for all cars that emit over 150 gCO2/km with the most polluting cars paying £405 per year, £5 up on 2008-09 rates..

In addition, from 1st April 2010, a new 'first-year rate' will be introduced for all new cars during the first year of ownership and will be dependent on the VED band. All new cars with emissions of 130 gCO2/km or less will have a zero-rated first-year rate (i.e. no 'road tax' will be charged in their first year) and then pay the standard rate thereafter; all new cars with emissions between 131 and 160 gCO2/km will pay the same first-year rate as the standard rate in 2010-11; and all new cars with emissions over 160 gCO2/km will pay a higher first-year rate, up to a maximum first-year rate for the most polluting cars of £950 in 2010-11.

The discount for alternatively fuelled cars will continue to be in the range £15 or £20 in 2009-10, but will be reduced to £10 in 2010-11, and will disappear in 2011, the rates aligning with the standard rates of VED.

12-month VED rates for cars registered since 1st March 2001*

*For cars registered before March 2001, the VED rates are charged according to engine size - £125 up to 1550cc and £190 for larger engine sizes. **Includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006. Figures updated to reflect November 2008 pre-Budget Report.