Vehicle excise duty (VED) is a tax levied on every vehicle using public roads in the UK and is collected by the Driver and Vehicle Licensing Agency (DVLA). For most cars registered prior to April 2017, the amount of VED due depended primarily on the car’s official CO2 emissions. For cars registered from April 2017 onwards, first year VED payments are related to CO2 emissions, but subsequent payments are not.
For instance, drivers of relatively fuel-efficient petrol or diesel cars would typically pay between £0 and £165 for the year when they first register the vehicle, depending on the car’s official CO2 emissions. Drivers of less fuel-efficient cars would pay more, up to a maximum of £2,070. More information can be found on the gov.uk website.
For the second-year payment onwards, most drivers will pay a fixed rate regardless of the CO2 emissions of their vehicle. Some drivers may also have to pay a luxury supplement if they drive a car with a ‘list price’ of more than £40,000. VED information on new or used cars can be found using the Vehicle Certification Agency’s online tool.
In our latest forecast, we expect VED to raise £6.5 billion in 2019-20. This reflects our assumption that the total number of VED-paying vehicles will rise to around 37.5 million in 2019-20, paying an average rate of around £175 a year. The £6.5 billion total would represent 0.8 per cent of all receipts and is equivalent to around £230 per household and 0.3 per cent of national income.