Outgoing Chancellor Rachel Reeves has used one of her final acts in office to impose a £170 annual charge on cars manufactured before 2017, as she prepares to be replaced by new Prime Minister Andy Burnham. The change affects vehicles in tax Band D, which covers CO₂ emissions between 121 g/km and 130 g/km.
New Tax Bands for Older Vehicles
Under the current system, vehicles are split into 13 tax bands, with lower-emission cars paying less road tax than higher-polluting models. The standard vehicle tax rate of £200 applies to most cars made since 2017, but older models face varying costs based on emissions. Drivers whose vehicles fall into Band D will now pay £170 annually, a significant increase for some.
Reeves, who is widely expected to be replaced by either Ed Miliband, Shabana Mahmood, or Yvette Cooper as Chancellor when Labour leader Andy Burnham succeeds Sir Keir Starmer, confirmed the new rates for the next tax year.
Impact on Motorists
Most motorists continue to pay around £200 a year in road tax, while owners of vehicles that originally cost more than £40,000 can face significantly higher charges. The removal of the zero-rate band for cars emitting under 100g/km has also caught some drivers off guard.
Andy Wood, tax expert at Tax Barrister UK, said: “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.”
Political Context
The announcement comes as Rachel Reeves prepares to exit the Treasury, with Andy Burnham set to become Prime Minister. The new car tax rates are among her last policy decisions, marking a continued focus on emissions-based taxation.
