Vehicle Excise Duty rates for zero-emission vehicles
Published 11 March 2020
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Who is likely to be affected
This will affect owners of zero-emission cars first registered from 1 April 2017.
General description of the measure
This measure will exempt all registered zero-emission light passenger vehicles registered from 1 April 2017 until 31 March 2025 from the Vehicle Excise Duty (VED) supplement for light passenger vehicles with a list price exceeding £40,000, starting from April 2020.
Policy objective
This measure will incentivise the uptake of zero-emission light passenger vehicles by reducing their VED liabilities. This will support the government’s ambition to increase zero-emission vehicle uptake.
Background to the measure
This measure was announced at Budget 2020 and will be legislated for in Finance Bill 2020.
Detailed proposal
Operative date
The change in the law will apply from 1 April 2020. This change will apply to all zero-emission vehicles registered from 1 April 2017 until 31 March 2025.
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
S1GE of Part 1AA, Schedule 1 to VERA will be amended to exclude vehicles which are zero-emission.
Summary of impacts
Exchequer impact (£m)
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | |
|---|---|---|---|---|---|---|
| Impact | - | -10 | -15 | -20 | -30 | -45 |
These figures are set out in Table 2.1 of Budget 2020 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document alongside Budget 2020.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will have a positive impact for current owners of zero-emission vehicles, registered from 1 April 2017 with a list price exceeding £40,000, as well as prospective future buyers. This is because by excluding zero-emission vehicles from the VED supplement, this measure will reduce the tax burden for taxpayers.
This measure is not expected to impact on family formation, stability or breakdown.
Customer experience is expected to stay broadly the same as there is not expected to be any complex change for individuals. To support individuals with this change, we will provide clear guidance to update of these changes.
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses that own or sell zero-emission vehicles by changes to their VED liabilities. One-off costs include familarisation with the new exemption. There are not expected to be any on-going costs.
There is expected to be no impact on civil society organisations.
Customer experience is expected to stay broadly the same as there is not expected to be any complex change for businesses. To support businesses with this change, we will provide clear guidance to update of these changes.
Operational impact (£m) (HMRC or other)
There will be negligible financial impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA).
Other impacts
The incentives to choose a zero-emission vehicle are strengthened as a result of his measure. This is expected to have positive impact on increasing zero-emission vehicle uptake, reducing transport carbon dioxide emissions and improving air quality.
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 CEU.Enquiries@hmtreasury.gov.uk