Rachel Reeves Implements New £5,690 Car Tax, Impacting Drivers Soon
Motorists in the UK are facing significant increases in car tax costs as the government implements new Vehicle Excise Duty (VED) rates. Chancellor Rachel Reeves announced these changes during the recent Autumn Budget, indicating that the new tax rates will take effect starting April 1, 2026.
Overview of New Car Tax Rates
Under the revised budget, all categories of vehicles—including cars, vans, and motorcycles—will see adjustments in tax rates. These will align with the Retail Price Index, reflecting an anticipated rise in vehicle taxes.
Key Tax Rate Changes
- 0g/km: Remains at £10
- 1-50g/km: Increases from £110 to £115
- 51-75g/km: Increases from £130 to £135
- 76-90g/km: Increases from £270 to £280
- 91-100g/km: Increases from £350 to £365
- 101-110g/km: Increases from £390 to £405
- 111-130g/km: Increases from £440 to £455
- 131-150g/km: Increases from £540 to £560
- 151-170g/km: Increases from £1,360 to £1,410
- 171-190g/km: Increases from £2,190 to £2,270
- 191-225g/km: Increases from £3,300 to £3,420
- 226-255g/km: Increases from £4,680 to £4,850
- Over 255g/km: Increases from £5,490 to £5,690
Impact on Electric and Hybrid Vehicles
Starting in 2028, electric and hybrid car owners will transition to a pay-per-mile tax system. This shift is aimed at ensuring that all vehicles contribute fairly to road maintenance and environmental costs.
Additionally, the Chancellor confirmed that VED first year rates for zero-emission vehicles will remain at £10 until 2029-2030. Only vehicles emitting between one and 50 grams of CO2 per kilometer will see modest tax increases.
Projected Revenue from Vehicle Excise Duty
The Office for Budget Responsibility predicts that the VED changes will generate £9.1 billion in revenue for the 2025/26 fiscal year. This amount will account for approximately 0.3% of the nation’s income, indicating the financial importance of vehicle taxation.
Conclusion
The impending rise in Vehicle Excise Duty rates marks a significant shift for UK motorists. With the increases set to take effect in 2026, drivers are encouraged to prepare for the financial implications of these new regulations. As the government prepares to implement these changes, the impact on various drivers, especially those with older diesel vehicles or high-emission cars, will be substantial.
