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.
Drivers of relatively fuel-efficient petrol or diesel cars (up to 50g/km CO2) typically pay up to £130 for the year when they first register the vehicle. Drivers of less fuel-efficient cars pay more, up to a maximum of £5490. More information can be found online.
For the second-year payment onwards, most drivers pay a fixed (“standard”) rate of £195 regardless of the CO2 emissions of their vehicle. Some drivers may also have to pay an expensive car supplement if they purchase a car with a ‘list price’ of more than £40,000.
Electric vehicles (EVs) were exempt from VED until the end of 2024-25. EVs first registered on or after 1 April 2017 will now be liable to pay a lower rate of £10 in the first year and the standard rate from the second year of registration onwards. A similar change applies to zero-emissions vans and motorcycles. EVs are also now subject to the expensive car supplement.
We forecast that VED will raise £9.1 billion in 2025-26. That represents 0.7 per cent of all receipts and is equivalent to £320 per household and 0.3 per cent of national income.