Chancellor Rachel Reeves has confirmed new vehicle excise duty (VED) rates for cars manufactured after 2001, potentially costing drivers hundreds of pounds extra per year. The bands for cars made between 2001 and 2017 have risen, meaning owners of older models may face significantly higher tax bills.
How the New Tax Bands Work
Most newer cars are subject to a flat annual payment of £200, but older models built between 2001 and 2017 fall into a sliding scale based on CO2 emissions. The bands range from A to M, with charges varying from as little as £20 to as much as £790 per year. For example, owners of Band I cars must pay £360 annually. Even cleaner vehicles emitting under 100 g/km of CO2, which were previously exempt, now incur a £20 charge.
Expert Warning for Drivers
Andy Wood, tax expert at Tax Barrister UK, warned: “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.”
He 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.”
What Drivers Should Do
Motorists are urged to research their car's tax band before purchasing, as the choice of vehicle can make a big difference to annual costs. Older cars are generally more likely to fall into higher bands, so checking emissions levels is essential.
