Chancellor Rachel Reeves has confirmed the latest vehicle excise duty (VED) rates, with owners of older cars warned they may face significantly higher tax bills. While most newer cars are subject to a flat £200 annual payment, vehicles manufactured between 2001 and 2017 fall into a sliding scale based on carbon dioxide (CO2) emissions. The most polluting models could incur charges as high as £790 per year.
Emissions-Based Tax Bands
Cars registered before 2017 are placed in tax bands ranging from A to M, determined by their CO2 output. Band A, for the cleanest vehicles, costs just £20 annually, while Band M, for the most polluting, demands £790. This means the type of car purchased can significantly impact annual running costs. For example, a vehicle in Band H is subject to a £325 yearly payment.
Changes to Zero-Rate Band
Rule changes have also eliminated the zero-rate band for cars emitting under 100 g/km of CO2. Drivers of these vehicles, previously exempt from road tax, must now pay £20 per year. This shift has caught many motorists off guard, as they had become accustomed to paying nothing.
Andy Wood, tax expert at Tax Barrister UK, commented: “A lot of drivers still assume road tax is calculated purely on the age of the vehicle, but emissions remain one of the biggest factors in determining how much motorists pay. Even relatively modest differences in CO2 output can place vehicles into entirely different tax bands, which can have a noticeable impact on annual running costs.”
Wood added: “The removal of the zero-rate band for cars emitting under 100g/km has caught some drivers off guard because many had become used to paying nothing at all. While £20 may not sound substantial on its own, it reflects a wider shift towards bringing more vehicles into the VED system regardless of emissions performance.”
Older cars are generally more polluting, so they are more likely to fall into higher tax bands. Owners may face bills of hundreds of pounds, making it essential for potential buyers to research a vehicle's emissions band before purchase.
