Vehicle Excise Duty rates for cars, vans and motorcycles from April 2023
Published 15 March 2023
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Who is likely to be affected
The registered keepers of cars, vans and motorcycles and holders of motorcycle trade licences.
General description of the measure
This measure will uprate the Vehicle Excise Duty (VED) rates for cars, vans and motorcycles by the Retail Prices Index (RPI). This is a standard uprating as in previous years and is due to come into effect from April 2023.
Policy objective
Increasing VED rates by RPI from April 2023 to April 2024 will ensure that VED receipts are maintained in real terms and that motorists make a fair contribution to the public finances.
Background to the measure
This measure was announced at the Spring Budget 2023. VED is a tax on vehicles used or kept on public roads and rates depend on the vehicle type, its characteristics such as emissions and its date of first registration. VED rates have increased in line with inflation since 2010.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2023 for all affected vehicles.
Current law
Section 1 of the Vehicle Excise and Registration Act (VERA) 1994 provides for the charging of VED. Section 2 of VERA 1994 provides that VED in respect of a vehicle type of any description is chargeable by reference to the applicable rate specified in Schedule 1 to VERA 1994.
Proposed revisions
Legislation will be introduced in Spring Finance Bill 2023 to amend the applicable rates for cars, vans and motorcycles specified in Schedule 1 to VERA 1994. Full details of the new rates are given in Annex A to the Overview of Tax Legislation and Rates (OOTLAR).
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | 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 macroeconomic impact.
Impact on individuals, households and families
This measure will impact on the registered keepers of affected vehicles and holders of motorcycle trade licences. The increase in VED rates is in line with RPI meaning rates will remain unchanged in real terms.
The measure is not expected to impact on family formation, stability or breakdown.
Customer experience is expected to remain broadly the same as this measure does not make any changes to the operation of the tax.
Equalities impacts
It is not expected that there will be adverse effects on any group sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses which own or sell vans, car or motorcycles, by changing their VED liabilities. One-off costs include familiarisation with the rate change. There are not expected to be any ongoing costs.
There is expected to be no significant impact on civil society organisations.
Customer experience is expected to remain broadly the same as this measure does not make any changes to the operation of the tax.
Operational impact (£m) (HMRC or other)
There will be negligible financial impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA) and no additional administrative costs for affected car, van or motorcycle drivers.
Other impacts
VED for cars is designed to encourage the uptake of lower emission vehicles. From 1 April 2017, a reformed VED system was introduced for new cars, with zero emission models paying no VED at first registration whilst the most polluting pay over £2,000. This measure will maintain the environmental signals within the reformed VED system as it will increase VED rates in line with inflation. The most polluting vehicles will see the largest nominal increases in their first year VED rates.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through the DVLA vehicle licensing data, as well as through regular communication with relevant stakeholders across government and in industry.
Further advice
If you have any questions about this change, contact the Treasury’s Energy and Transport Taxes Team by email at: ETTAnswers@HMTreasury.gov.uk.