Vehicle excise duty (VED) affects practically all drivers. Also known as road tax or car tax, it contributes to the central government fund, which pays for things like road works – but also all the other things the government is responsible for.
Unfortunately, with the rise in inflation comes an expected rise in VED. That was confirmed in the March 2023 budget, to the dismay of many drivers. In this post, we’ll outline what’s changing and how it will affect you.
VED changes to date
Car tax changing again? You heard it right. The latest price hike follows a big change in November 2022, when it was announced that electric car drivers will no longer be exempt from 2025. That might feel like a good thing for petrol and diesel drivers, who want everyone to pay their fair share.
However, it removes one of the much-needed incentives of the expensive switch to electric driving. It also means that the majority of people won’t benefit as they’re forced over to electric in the coming years. Remember, the 2030 ban on new petrol and diesel vehicles isn’t that far away!
In the same month, it was announced that the Band A rate for VED is being scrapped. This was in place for low-emitting cars registered before 2017, making them exempt from road tax charges. From 2025, they’ll be subject to the Band B amount of £20 per year, while hybrid drivers will have their discount removed too.
What happened in the March 2023 budget?
The budget announcement in March 2023 saw VED rates confirmed for the coming year. From April 2023, Chancellor Jeremy Hunt announced that the flat rate of road tax will be £180, which is a £15 increase on the £165 figure from the previous year. Owners of alternatively fuelled vehicles will pay £170 per year, thanks to a small discount of £10.
On the flipside, expensive cars – costing £40,000 or more – will be subject to an additional £390 supplement, which is an increase of £35 from £355 in previous years. Unfortunately, you can’t avoid that if you manage to barter your way to a sub-40k figure, as the charges are based on the car’s original cost for tax purposes.
There’s a slight difference for hybrid cars that cost over £40,000, as they get the £10 discount – meaning the total figure is £560 rather than £570! That surcharge applies for five years, starting from the second year of registration. The first-year rate depends on the CO2 emissions of the vehicle in question:
|
CO2 emissions (g/km) |
First year VED rate |
|---|---|
|
0 |
£0 |
|
1 – 50 |
£10 |
|
51 – 75 |
£30 |
|
76 – 90 |
£130 |
|
91 – 100 |
£165 |
|
101 – 110 |
£185 |
|
111 – 130 |
£210 |
|
131 – 150 |
£255 |
|
151 – 170 |
£645 |
|
171 – 190 |
£1,040 |
|
191 – 225 |
£1,565 |
|
226 – 255 |
£2,220 |
|
255+ |
£2,605 |
Does this apply to all cars?
Cars are taxed based on the VED system that was in place when they were registered. That means that all cars registered from the start of March 2001 to the end of March 2017 are taxed using a different format.
In this case, the categories are based on different levels of CO2 emissions. However, the rates themselves are still subject to inflation. Here are the bands and rates for cars registered before April 2017…
|
VED Band |
CO2 Emissions |
VED rate |
|
A |
Up to 100 g/km |
£0 |
|
B |
101-110 g/km |
£20 |
|
C |
111-120 g/km |
£35 |
|
D |
121-130 g/km |
£150 |
|
E |
131-140 g/km |
£180 |
|
F |
141-150 g/km |
£200 |
|
G |
151-165 g/km |
£240 |
|
H |
166-175 g/km |
£290 |
|
I |
176-185 g/km |
£320 |
|
J |
186-200 g/km |
£365 |
|
K |
201-225 g/km |
£395 |
|
L |
226-255 g/km |
£675 |
|
M |
Over 255 g/km |
£695 |
What next?
Now you have the facts, if you have want to discuss your leasing options then don’t hesitate to contact our team today. Call 0161 516 1938 or email info@leasingoptions.co.uk.
