Rachel Reeves confirms new £560 charge for petrol drivers
The Chancellor appears to be waging war on motorists
Under pressure British motorists are set to get hammered by the Chancellor Rachel Reeves with another tax despite the Iran war already sending fuel prices soaring. Sadly, it's not an April Fool's Day joke that from the first of this month the Treasury has decided to hike Vehicle Excise Duty (VED), more commonly known as 'car tax' or 'road tax', for road-loving Brits.
From April 1, for most cars registered after April 1, 2017, the standard flat annual VED rate has risen from £195 to £200. This applies to petrol, diesel, hybrid and electric vehicles within this date range. VED is the tax charged annually to keep a vehicle valid for use on public roads in Britain.
How much a vehicle owner pays in VED depends on a number of factors, including the type of vehicle owned, when it was first registered, or its environmental performance (CO2 emmissions). An average new petrol car (around 143g/km) carries a first-year charge of £560, rising to £1,360 for an average new diesel, Richmond Motor Group reports. Even worse, a car emitting more than 255g/km of CO₂ will now be stung by a first-year rate of £5,690 – up £200.
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According to the House of Commons Library, a tax on vehicles was first introduced in Great Britain in 1889 via the Customs and Inland Revenue Act 1888.
From 1909, the tax became linked to the construction and upkeep of the road network through the Development and Road Improvement Funds Act 1909. This is no longer the case, and VED revenue is not hypothecated for road maintenance. More recently, VED became more closely linked to vehicles’ environmental performance (to reflect wider negative externalities of car usage).
VED has been criticised for not effectively targeting the external costs of motoring (for instance, road damage and pollution), since it is paid at the same rate regardless of how much the vehicle is getting used.
Drivers need to pay tax when the vehicle is first registered and this covers the vehicle for 12 months. Tax is then payable every six or 12 months at a different rate. The rate of tax is based on a vehicle’s CO2 emissions.
For vehicles with a list price of more than £40,000 (petrol/diesel) or £50,000 (electric), drivers have to pay an extra £440 a year if they have any of the following, a car or motorhome with a list price of more than £40,000 or an electric car or motorhome with a list price of more than £50,000. This also applies to electric vehicles registered between 1 April 2025 and 31 March 2026.
Drivers who do not have to pay this rate if both the following apply; it is a zero emission vehicle and the vehicle was registered before 1 April 2025.
