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Today the Chancellor announced a new vehicle excise duty (VED) banding system for cars registered on or after 1 April 2017. First year rates will vary according to the vehicle’s CO₂ emissions. There will be a flat standard rate of £140 for all cars for subsequent years, except those emitting 0g/km of CO₂, for which the standard rate will be £0. Cars, including zero-emission cars, with a list price above £40,000 will be subject to a £310-per-year supplement for the first five years in which the standard rate is paid.

Mike Hawes, SMMTChief Executive, said, “We recognise the current VED system needs to be reformed and highlighted this in a recent report. The Chancellor’s Budget announcement on the regime came as a surprise and is of considerable concern. While we are pleased that zero-emission cars will, on the whole, remain exempt from VED, the new regime will disincentivise take up of low emission vehicles. New technologies such as plug-in hybrid, the fastest growing ultra low emission vehicle segment, will not benefit from long-term VED incentive, threatening the ability of the UK and the UK automotive sector to meet ever stricter CO₂ targets.

“The introduction of a surcharge on premium cars also risks undermining growth in UK manufacturing and exports. British-built premium cars are in increasing demand at home and globally, and the industry helps to support almost 800,000 jobs in the UK. Levelling a punitive tax on these vehicles will almost certainly impact domestic demand.”

New VED rates to apply to new cars registered on or after 1 April 2017