To legally drive your car, you need to be aware of certain taxes. Possibly the most important of these taxes is vehicle excise duty, often abbreviated to VED.
But what is it, and how do you pay for it? We’ve gathered all the information you need to know to make sense of it all right here. Read on to find out what vehicle excise duty is, which vehicles it covers and how you’re supposed to pay.
What is vehicle excise duty (VED)?
Vehicle excise duty is a tax paid annually by drivers of vehicles that are driven or parked on public roads. The tax covers the whole of the United Kingdom (that’s England, Wales, Scotland and Northern Ireland).
It covers cars, motorcycles, light goods vehicles and heavy goods vehicles. Taxes on cars aren’t a recent development, but several things have changed over the years.
VED was introduced in its current form in 2001 as part of what the government claimed was a push to reduce the amount of pollutants released into the atmosphere.
Where the confusion comes for many drivers is the name of this specific tax. Despite often being referred to as ‘road tax’, VED isn’t a tax on the road - it’s on the vehicles that use it. Road tax was abolished in the 1930s.
While many of us aren’t fans of taxes, VED does bring in a significant amount of money for the government. It supposedly brought in £7.4 billion in 2022/23 according to the House of Commons library, and this figure is predicted to rise to £9.4bn by 2027/28.
As of 2015’s budget, which was introduced by then-chancellor George Osborne and implemented in 2020 by current prime minister Rishi Sunak, all money raised through VED goes back into maintaining the upkeep of the UK road system.
Further changes came in 2020, partly in a bid to increase the appeal of electric vehicle ownership. VED was uprated in line with the retail prices index (RPI) for cars, vans, motorcycles and motorcycle trade licences, and switched from using the NEDC emissions scale to the WLTP system to establish
How is vehicle excise duty calculated?
Since 1999, VED has been calculated according to the CO2 output of your vehicle. Vehicles emitting more pollutants cost more to tax, as part of efforts to persuade drivers to consider buying cleaner vehicles.
Cars registered from 1 March 2001 to 31 March 2017 are taxed based on their CO2 emissions. Cars registered on or after 1 April 2017 pay a first-year figure according to their emissions. This will, of course, be different for every car.
All cars registered on or after 1 April 2017 pay the same flat rate from the second year and beyond, but cars with a list price of more than £40,000 pay a premium, called ‘expensive car supplement’, from years two to six of registration.
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I'll give almost the same comment as I did 4years ago ( see below ).
The written explanation is fine, but then from nowhere, a table is produced stating the VED rates in various bands with no further explanation. Where has this been pulled from? To me it looks like the VED table for cars registered prior to April 2017, but even then the actual figures themselves appear to be out-of-date. Has someone simply cut-n-pasted this table from an old article?
It would have been helpful to state what this table refers to as no doubt someone reading it will think their 2023 e-tech Renault Clio ( 96-97 g/km Co2 ) annual VED is £0 when in fact it's £180 at current rates.
Dear Autocar.
Is this a regurgitated article from 2020? Please could you update the figures and may be mention the pre 2006 cut off at band K that makes a huge difference for larger cars pre and post March 2006. Definately worth a mention.
Thanks to inflation, £40k in 2017 is equivalent to £51k in 2024, and I suspect car price inflation is higher than that. They really should increase the 'luxury' threshold to £50k as it must be capturing a far greater share of new vehicle sales than when it was first introduced.
I know most people don't have £40k lying around to buy a car, but if you need a famly sized vehicle some fairly mundane stuff comes in over the £40k mark these days (especially if you want to go plug-in hybrid or electric) and don't forget that the higher VED will also sting the next buyer who picks up a vehicle for £20k at 3yrs old.
Another measure aimed at the 'rich' but hits hardest those in the middle.