Chancellor Rachel Reeves has confirmed that drivers of vehicles registered after April 2017 could face a car tax charge of up to £4,850 under new Vehicle Excise Duty (VED) bands introduced by the Labour Party government. The new rates, which apply to cars emitting between 226 and 255 grams of CO2 per kilometre, were announced in the Autumn Statement last November and are now coming into effect.
What is Vehicle Excise Duty?
According to the RAC, VED—commonly known as car tax or road tax—is a tax levied on vehicles used on public roads in the UK. First introduced in 1937, it replaced the earlier system of road tax that originated from the taxation of Hackney Carriages in the 17th century. The familiar tax disc was introduced in 1921, and until 1974, local authorities handled car taxation.
How VED is Collected and Used
The DVLA collects approximately £5 billion annually from VED, but contrary to popular belief, not all of this revenue is directed toward road improvements. The RAC explains that VED is grouped with other taxes, meaning the income could be spent on education, healthcare, or other public services. The tax disc has been scrapped, and VED is now managed via an electronic database as part of the government's digital transformation.
Law enforcement uses Automatic Number Plate Recognition (ANPR) cameras, which cross-reference data with the DVLA database to identify untaxed vehicles. Vehicle owners receive automatic reminders before their tax expires, typically at the end of each month. For example, if a car is taxed from 1 January for 12 months, renewal is due before the end of December.
Key Details for Drivers
Drivers can tax their vehicle for six or 12 months, and tax liability begins as soon as ownership is taken. However, owners of efficient new vehicles may pay little or nothing. The new £4,850 charge specifically targets high-emission cars registered after April 2017, making it crucial for motorists to check their vehicle's CO2 emissions band.
