Rachel Reeves has introduced a new £3,420 charge for motorists through updated tax bands for cars registered after April 2017. The tax bands have been confirmed by HM Treasury and the Labour Party government.
Tax Band Details
One of the bands, for vehicles emitting between 191 and 225 grams of CO2 per kilometre, will cost drivers a substantial £3,420. However, this is not the highest rate. Two additional bands are set at £4,850 and £5,690 respectively.
Additional Charges for Expensive Cars
Cars with a list price exceeding £40,000 (or £50,000 for electric vehicles) when new incur an extra £440 per year on top of the standard rate, applicable for five years. This five-year period begins from the second year the vehicle is first registered.
Government Guidance
The government advises: "You’ll pay a rate based on a vehicle’s CO2 emissions the first time it’s registered. This also applies to some motorhomes. You have to pay a higher rate for diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions." Motorists can check with their car's manufacturer to see if it meets the RDE2 standard.
Vehicle tax must be paid when the vehicle is first registered, covering it for 12 months. Thereafter, tax is paid every six or 12 months at a different rate.
Background on Vehicle Excise Duty
A duty on motor vehicles has existed in the UK since the early 20th century. The primary legislation for VED is consolidated in the Vehicle Excise and Registration (VERA) Act 1994, with rates typically changed via the annual Finance Bill.
In 2024/25, VED raised £8.2 billion. The Office for Budget Responsibility estimates this will increase to £13.3 billion by 2030/31. The amount a vehicle owner pays depends on factors such as vehicle type, registration date, and environmental performance.
