Drivers in Guernsey could soon face a new annual vehicle tax costing an average of £132 per year, marking the first such increase in 18 years. The proposed changes are part of the 2026 Tax Reform Package, which includes a 25% reduction in fuel duty, estimated to save private vehicle owners between £130 and £140 annually.
New Vehicle Tax Details
The new annual vehicle tax would apply to all vehicles, including electric and hybrid models, and would be based on weight and emissions. Charges would range from £25 to £280, with a median charge of approximately £132. Additionally, a surcharge for high-value private vehicles above £50,000 (with some exemptions) would be added to the vehicle first registration duty, starting at £2,500.
Government's Rationale
Deputy Lindsay de Sausmarez, President of the Policy & Resources Committee, stated: "We have been acutely aware of how much some people are struggling - whether they're working full time or whether they're retired; whether they rent or pay a mortgage, and whether they have young children or older loved ones to care for."
She added: "We're also keenly aware of the state of our public finances, and the need to put them on a stronger and more sustainable footing to provide the services and infrastructure the islands need, now and in the future."
Balanced Approach
The 2026 Tax Reform Package aims to improve Guernsey's financial position by £59m a year, including £20m of expenditure reductions and £39m of additional revenue. De Sausmarez emphasized: "This package is a balanced, pragmatic and proportionate response to the financial challenge we face."
The package also reduces the Goods and Services Tax (GST) to 3% to help limit the impact on the cost of living. De Sausmarez noted: "We've listened carefully to feedback on the previous tax package agreed by the last Assembly in 2024 and have responded to those concerns."
Future Flexibility
The package includes flexibility to review the financial situation as more clarity emerges on future revenue sources such as offshore wind, Pillar 2, and economic growth. "The next States can look at that wider economic picture as well as the savings and revenue generated by the measures in this package once they've been put into practice, so that a decision on the longer-term trajectory is firmly evidence-based," de Sausmarez concluded.
