Vehicle Excise Duty hike: Drivers face up to £5,690 charge and hauliers warn of fresh cost shock
Vehicle Excise Duty will be raised in line with inflation from April 1, 2026, creating higher bills for motorists and prompting warnings that planned increases for heavy goods vehicles could hit hauliers hard. The move follows changes to first-year car rates announced earlier and introduces mileage-based charges for electric and hybrid vehicles from 2028.
What the Vehicle Excise Duty changes mean for car owners
The Chancellor set new car tax rates in the recent Autumn Budget. Vehicle Excise Duty for cars, vans and motorcycles will rise in line with the Retail Price Index from the new financial year on April 1, 2026. First-year VED rates were also adjusted from April 1, 2025: zero-emission cars will pay a first-year rate of £10 until 2029-2030, while vehicles emitting between one and 50g of CO2 per kilometre will face modest first-year increases and will pay £110 in that initial registration year.
For higher-emission cars, costs jump sharply. Vehicles emitting more than 76g/km saw first-year rates double in prior changes, moving from £270 for the 76-90g/km band to £5, 490 for the most polluting brackets. With the upcoming inflation-related uplift to first-year rates, owners of the most polluting cars could face bills up to £5, 690.
Diesel rules and emissions testing impact
Certain diesel drivers will incur higher VED if their vehicles fail to meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions. Diesel cars that do not meet RDE2 and emit between one and 255g/km will face higher charges than other diesel models; rates are equalised for emissions above 255g/km. This change creates a direct link between nitrogen oxide compliance and tax treatment for diesel owners.
Band increases and the Office for Budget Responsibility forecast
Specific band uplifts include the 151-170g/km band rising from £1, 360 to £1, 410 and the 171-190g/km band rising from £2, 190 to £2, 270. The Office for Budget Responsibility forecasts that VED will raise £9. 1 billion in 2025/26, equivalent to 0. 3% of national income.
Electric and hybrid drivers to face pay-per-mile from 2028
The Autumn Budget included plans to introduce pay-per-mile charges for electric car and hybrid owners from 2028, shifting some future charging from fixed purchase-time taxes to usage-based payments. This change is scheduled to begin in 2028 and will alter how owners of electric and hybrid vehicles are taxed.
HGV VED rises, fuel duty schedule and industry alarm
Ministers have raised concerns about plans to uprate Vehicle Excise Duty for heavy goods vehicles from April 1 this year, with the increase set to follow the Retail Price Index. VED rates for HGVs apply to rigid trucks without trailers and tractive units, the cab of an articulated lorry, rigid goods vehicles with trailers, vehicles with exceptional loads, and haulage vehicles other than showman’s vehicles. For a 44-tonne truck, the annual VED is currently £1, 643 for 2025/26.
This will be the first HGV VED increase since the tax was frozen in 2014 and will coincide with an annual rise in HGV Levy rates on April 1. Hauliers also face staged rises in fuel duty: an extra 1p per litre on September 1 this year reversing a temporary 5p-per-litre cut introduced in 2022; a further 2p per litre on December 1; another 2p per litre on March 1, 2027; and from April 2027 fuel duty rising again in line with the Retail Prices Index.
Political scrutiny and sector impact
In a recent parliamentary meeting on the annual Finance Bill, the Shadow Exchequer Secretary James Wild expressed concern about the timing of HGV VED and levy increases and the absence of meaningful backing for the most affected industries, especially the logistics sector. He emphasised that HGV Vehicle Excise Duty is complex, with more than 80 different rates dependent on weight, emissions, class and configuration.
Operators already face cost pressures from rising business rates, higher fuel duties and increased employment and transport taxes. Research cited in discussion estimated that fuel duty adds more than £2, 000 a year to the cost of running a single HGV, amounting to £435 million in additional costs across the sector. The logistics industry was described as contributing £170 billion in gross value added and employing around 8% of the workforce, leading to calls for stronger support to safeguard investment, efficiency and decarbonisation plans.
The sector warned that these fiscal choices risk stalling progress on decarbonisation and highlighted the absence of fiscal support for low-carbon fuels such as hydrotreated vegetable oil as battery and hydrogen technologies scale up. There is no sign of extending full expensing to higher bands, an option the industry believes merits consideration. Questions were raised about what assessment has been made of the impact of these increases on the industry’s ability to invest, be efficient, grow and decarbonise.
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Recent updates indicate these measures will proceed on the timelines stated; details may evolve as legislative measures in the Finance Bill are enacted.
