Rachel Reeves confirms new £560 charge for petrol drivers | UK | News
Pressured British motorists are set to be hit with another tax by Chancellor Rachel Reeves despite the Iran war already causing fuel prices to soar. Unfortunately, it’s no April Fool’s joke as the Treasury has decided to increase Vehicle Excise Duty (VED), more commonly known as ‘car tax’ or ‘road tax’ for road-loving Brits, from the beginning of this month.
From 1 April the standard fixed annual VED rate increased from £195 to £200 for most cars registered after 1 April 2017. This applies to gasoline, diesel, hybrid and electric vehicles within this date range. VED is a tax levied 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 emissions). The average new petrol car (approximately 143g/km) costs £560 in the first year, rising to £1,360 for an average new diesel. Richmond Engine Group reports. To make matters worse, the first year interest rate on a car that emits more than 255g/km of CO₂ will now be £5,690, an increase of £200.
According to the House of Commons Library, a tax on vehicles in Great Britain was first introduced in 1889 through the Customs and Revenue Act 1888.
From 1909 the tax was linked to the construction and maintenance of the road network through the Development and Road Improvement Funds Act 1909. This is no longer the case and VED income is not assumed for road maintenance. More recently, VED has become more closely linked to the environmental performance of vehicles (reflecting the broader negative externalities of car use).
VED has been criticized for not effectively targeting the external costs of driving (e.g. road damage and pollution), as it is paid at the same rate no matter how much the vehicle is used.
Drivers must pay tax when the vehicle is first registered and this covers the vehicle for 12 months. The tax will then be paid at a different rate every six or 12 months. The tax rate is based on the vehicle’s CO2 emissions.
For vehicles with a list price over £40,000 (petrol/diesel) or £50,000 (electric), motorists who own any of the following, such as a car or caravan with a list price over £40,000 or an electric car or caravan with a list price over £50,000, will need to pay an extra £440 per year. This also applies to electric vehicles registered between 1 April 2025 and 31 March 2026.
Drivers who do not have to pay this fee if both of the following situations are valid; It is a zero-emission vehicle and the vehicle was registered before April 1, 2025.
