Vehicle Excise Duty: increase in rates for cars, vans, motorcycles and motorcycle trade licences
Published 8 March 2017
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Who is likely to be affected
Owners of cars registered before 1 April 2017, vans, motorcycles and holders of motorcycle trade licences.
General description of the measure
Vehicle Excise Duty (VED) is paid on vehicle ownership, and rates depend on the vehicle type and first registration date. This measure increases VED rates in line with the Retail Prices Index (RPI).
Policy objective
Increasing VED rates by RPI in 2017 to 2018 ensures that VED receipts are maintained in real terms and that motorists make a fair contribution to the public finances.
Background to the measure
VED is paid on vehicle ownership, and rates depend on the vehicle type and first registration date. VED rates have increased in line with inflation since 2010.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2017 for all cars registered before 1 April 2017, vans, motorcycles and motorcycle trade licences.
Current law
Section 1 of the Vehicle and Registration Act (VERA) 1994 provides for the charging of VED. Section 2 of VERA provides that VED in respect of a vehicle of any description is chargeable by reference to the applicable rate specified in schedule 1 of VERA.
Proposed revisions
Legislation will be introduced in Finance Bill 2017 to amend the applicable rates for cars, vans, motorcycles and motorcycle trade licences specified in Schedule 1 of VERA. Full details of the new rates are given in Annex B to the Overview of Tax Legislation and Rates.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is expected to have a small positive effect on inflation but is not expected to have any other significant macroeconomic impacts.
Impact on individuals, households and families
This measure would impact on motorists owning a car, van or motorcycle or using a motorcycle trade licence. Approximately 98% of motorists owning a car first registered after March 2001 (post-2001 car), but before 1 April 2017 would pay no more than £5 extra VED. Owners of post-2001 vans and pre-2001 cars and vans would pay approximately £5 extra in VED.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure will have no differential impact on any equality groups. However those who drive will be impacted differentially dependent on their car choice, as VED is graduated based on the vehicles’ CO2 emissions.
Impact on business including civil society organisations
The measure is expected to have a negligible impact on businesses’ and civil society organisations’ administrative burdens as they familiarise themselves with the rate change but the cost of some vehicle licenses will rise.
Operational impact (£m) (HM Revenue and Customs or other)
There will be negligible impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA) and no additional administrative costs for affected car, van or motorcycle drivers.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be evaluated and monitored through the DVLA vehicle licensing data.
Further advice
If you have any questions about this change, please contact the DVLA on Telephone: 0300 790 6802 or online at: https://www.gov.uk/contact-the-dvla.