Fleet News

Emergency Budget 2015: More new cars to be subject to first-year VED charges


More new cars will be subject to vehicle excise duty tax from April 2017 due to falling CO2 emissions, Chancellor George Osborne announced in today's Emergency Budget.

Osborne said that if the current VED regime remained in place, by 2017 three-quarters of new cars will pay no road tax in their first year.

He said this was not "sustainable" and was not "fair" to people who were unable to afford new, low CO2 emitting cars.

The new VED regime will still be based on CO2 emissions but would be split into three bands - zero emission, standard, and premium.

Cars with a list price of above £40,000 will attract £310 per year for the first five years in which the standard rate is paid.

Table: VED bands and rates for cars first registered on or after April 1 2017

CO2 emissions (g/km)

First year rate

Standard rate 



















110 -130


















Over 255



Osborne also announced the creation of a new roads fund into which VED revenue would go, and this would be used purely for road investment.

"Every pound raised from VED from the end of the decade will go into the fund to pay for the sustained investment roads so desperately need," he added.

Other Budget announcements:

  • The Government will also consult on extending the length of time a new car has before it has its first MOT test from three years to four years.
  • Fuel duty will remain frozen this year.
  • The Government will publish a second road investment strategy by the end of this parliament.
  • The Government committed £14 million to local road improvements - £5.5m for maintenance and upgrade of the Swanswell Viaduct, £3m for Tameside Metropolitan Borough Council to make structural improvements to walls around local roads and £5.8 for the A666 Highways Maintenance Scheme in Bolton.
  • The Government is improving road connectivity in the north by upgrading the A628 and dualling the A61, and by upgrading the final stretch of the M1/A1 route between Newcastle and London to motorway. The Government will look into the case for renaming the A1(M) north of Leeds as the M1. The A1 will be dualled north of Newcastle as far as Ellingham, and access to the Port of Immingham will be improved with upgrades to the A160/A180.
  • The Government will legislate to apply a reduced rate of fuel duty to aqua-methanol in Finance Bill 2016.

Fleet News has collated views from the industry and leasing companies in two Budget response round-ups.

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  • Bob the Engineer - 08/07/2015 18:15

    Really harsh to include the 0-50 ultra low vehicles in the same yr2+ rate, as the vast majority of vehicles won't make this level so revenue would remain but it is a feasible level for manufacturers to try and achieve with hybrids so would encourage their continued development and an overall lowering of average emissions.

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  • Tricky - 09/07/2015 12:11

    Good that low emissions cars are paying something now as well , this is still popularly known as 'road tax' and regardless of emissions you still use the roads. I predict record car sales in March 2017 as people rush to beat these changes! Saving £1550 on anything over £40K

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  • sage&onion - 09/07/2015 17:07

    So, if you spec up an Audi A3 e-tron, which has 37g/km, with options to take it over £40k P11D value, which is easily possible, then the VED you pay will be equivalent to taking a car with a co2 of between 190-225g/km! Well done George! You've probably just killed the development of executive hybrids and plug-in hybrids, and lets face it an "executive" driver is hardly going to come out of an executive car and choose a mainstream hybrid. Great new for the likes of Toyota but not so great for Audi, Merc et al and not great for take up of hybrids for business executives who currently have the incentive to lead by example by choosing hybrids.

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    • sage&onion - 09/07/2015 17:14

      VED paid over a five year life that is!

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