Chancellor Rachel Reeves has confirmed new Vehicle Excise Duty (VED) bands for the 2026-27 tax year, resulting in a £1,410 charge for drivers of standard cars parked on driveways. The Labour government's updated tax structure, announced by HM Treasury, targets vehicles with CO2 emissions between 151 and 170 grams per kilometre, placing them in Band I.
First-Year Tax Rates Rise with Inflation
For cars registered on or after 1 April 2017, the first-year VED is based on emissions. Zero-emission vehicles pay just £10, while high-polluters face over £5,000. Most new petrol and RDE2 diesel cars fall in the £135–£280 range (51-90g/km), but all move to a flat standard rate of £200 from year two onwards. The £1,410 Band I rate applies to cars emitting 151–170g/km, a significant increase designed to discourage high-emission vehicles.
Examples of Affected Vehicles
Motor groups confirm that standard performance cars, such as the Volkswagen Golf GTI (162g/km), fall into this category. EVO magazine noted: 'First-year and owner VED for cars emitting 1-50g/km jumped from £10 to £110 from April 1 2025, while 51-75g/km emitters rose from £30 to £135. All prices are set to rise incrementally in 2026 in line with the retail price index.'
Changes in CO2 Testing Standards
The CO2 output and MPG testing has shifted to Euro 6e-bis standards, extending PHEV testing from 497 miles to 1,367 miles. This incorporates more combustion-only running, resulting in higher stated CO2 figures. For example, the G90 M5 moves from the 1-50g/km band to 101-109g/km, and the Bentley Continental GT from 1-50g/km to 91-100g/km. Most PHEVs will jump a band or two due to the new tests.
Government Easement for Company Car Buyers
An easement has been granted for company car buyers: all PHEVs bought as company cars between 1 January 2025 and 5 April 2028 that are reclassified to a 50g/km+ figure after updated testing will remain in the lowest class for benefit-in-kind tax purposes. This temporary measure prevents a sudden rise in BIK costs for buyers who purchased PHEVs in good faith.
