Policy paper

Vehicle Excise Duty: rates for cars, vans, motorcycles and motorcycle trade licences from April 2018

Published 22 November 2017

Who is likely to be affected

Owners of vans, motorcycles and holders of motorcycle trade licences and pre-2017 cars, as well as those purchasing cars under the post-April 2017 Vehicle Excise Duty (VED) system.

General description

This measure will uprate, by Retail Price Index (RPI), the VED rates for vans, motorbikes and pre-2017 cars, as well as First Year Rates for cars under the post-April 2017 VED system. This is a standard uprating to come into effect from April 2018.

Policy objective

Increasing VED rates by RPI in 2018 to 2019 will ensure that VED receipts are maintained in real terms and that motorists continue to 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 2018 for all vans, motorcycles and motorcycle trade licences, cars registered before 1 April 2017, and the First-Year Rate of any new cars under the post-April 2017 VED system.

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 2017-18 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

The measure is not expected to have any significant economic 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 no more than £10 extra in VED. Above 90% of purchasers buying a new car from 1 April 2018 would pay no more than £5 extra in VED.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

Vehicle owners will be affected and the impacts will therefore be greater on those protected characteristics more greatly represented in that population. Data is not collected on protected characteristics of VED payers.

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.

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.