The Treasury has issued a comprehensive update on significant modifications to Vehicle Excise Duty (VED), with new rates scheduled to take effect from April 2026. These changes will result in increased costs for petrol and diesel vehicle owners, particularly targeting models with higher carbon dioxide emissions.
Substantial Increases for High-Emission Vehicles
Under the revised structure, the most polluting vehicles will face a first-year VED fee expected to reach £5,690 starting April 1, 2026. This represents a continuation of substantial modifications implemented last year, which saw some models experience increases as high as £2,745. The adjustments are designed to create a stronger financial incentive for consumers to consider lower-emission alternatives.
Parliamentary Scrutiny and Government Response
Labour MP Neil Duncan-Jordan recently questioned whether the planned tax increases should be calculated based on manufacturer emissions data or actual MOT test results. In response, Exchequer Secretary Dan Tomlinson clarified that VED rates are determined by multiple factors including date of first registration, vehicle weight, and CO2 emissions.
Tomlinson confirmed that from April 2026, VED rates for cars, vans, motorcycles, and heavy goods vehicles will be adjusted in line with the Retail Price Index. When Independent MP James McMurdock inquired about potential reviews to the VED structure, Tomlinson stated that the government currently has no plans for such a review.
Detailed Rate Changes for Different Emissions Bands
The government has released specific figures for the upcoming rate adjustments. For vehicles registered between March 2001 and April 2017, changes include:
- 121-130g/km: Rising from £165 to £170
- 131-140g/km: Rising from £195 to £200
- 141-150g/km: Rising from £215 to £225
- 151-165g/km: Rising from £265 to £275
- 166-175g/km: Rising from £315 to £325
- 176-185g/km: Rising from £345 to £360
- 186-200g/km: Rising from £395 to £410
- 201-225g/km: Rising from £430 to £445
- 226-255g/km: Rising from £735 to £760
- Over 255g/km: Rising from £750 to £790
First-Year VED Charges and Manufacturer Impact
The government dramatically increased first-year VED charges for petrol and diesel vehicles beginning in April 2025. These substantial fees, paid by purchasers of new cars before transitioning to standard rates, have increased on a sliding scale with most higher bands experiencing doubled fees compared to 2024 levels.
Vehicles emitting over 255g/km of CO2 faced the steepest £2,745 increase, affecting some of Britain's most widely-driven cars. This charge rose to £5,490 for the first year and is expected to reach £5,690 from April 2026.
Mainstream manufacturers including Ford, Toyota, BMW, Mercedes, and Audi will see certain models affected by these changes. Premium marques will shoulder the greatest burden, with models from Porsche, Lotus, Lamborghini, and McLaren among those facing the new levy.
Expected First-Year Rates from April 2026
The Treasury has provided detailed projections for first-year car tax rates effective April 1, 2026:
- 0g/km: Remains at £10
- 1-50g/km: Rising from £110 to £115
- 51-75g/km: Rising from £130 to £135
- 76-90g/km: Rising from £270 to £280
- 91-100g/km: Rising from £350 to £365
- 101-110g/km: Rising from £390 to £405
- 111-130g/km: Rising from £440 to £455
- 131-150g/km: Rising from £540 to £560
- 151-170g/km: Rising from £1,360 to £1,410
- 171-190g/km: Rising from £2,190 to £2,270
- 191-225g/km: Rising from £3,300 to £3,420
- 226-255g/km: Rising from £4,680 to £4,850
- Over 255g/km: Rising from £5,490 to £5,690
After the first year, vehicles will transition to the standard rate, expected to be £200 (currently £195).
High-Emission Vehicle List and Additional Charges
The government has released a comprehensive list of new models emitting over 255g/km that will be affected by these changes. This includes vehicles from Audi, McLaren, Lamborghini, Chevrolet, Volkswagen, Aston Martin, Ferrari, Range Rover, Jaguar, Porsche, Jeep, Ford, Lotus, Bentley, Toyota, Mercedes-Benz, INEOS, Land Rover, Rolls-Royce, Alfa Romeo, Maserati, and BMW.
Luxury Car Tax Surcharge Adjustments
Vehicles costing more than £40,000 when new (including options) incur an additional annual charge of £425 (increasing from £410) on top of standard VED rates. This surcharge applies from the vehicle's first through sixth birthdays, resulting in £2,125 in extra tax over five years.
From April 2026, the threshold for this luxury car tax will increase to £50,000 for electric vehicles while remaining at £40,000 for petrol and diesel cars. This differential treatment reflects the government's strategy to encourage electric vehicle adoption while maintaining higher charges for traditional combustion engine vehicles.
Alternative Taxation for Older Vehicles
For vehicles registered before March 2001, taxation follows different parameters based on engine size categories rather than CO2 emissions. The government has established specific rate structures for these older models, recognizing their different technological characteristics and environmental impacts.
Chancellor Rachel Reeves announced these measures as part of a broader strategy to incentivize consumers toward electric vehicles and create greater differentiation between higher-polluting cars and EVs. Currently, electric vehicles remain exempt from Vehicle Excise Duty, while cars emitting between 111g and 150g/km of CO2 face a £220 charge.
The Treasury's announcement also referenced the introduction of Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars scheduled to take effect from April 2028. Under this system, drivers will pay for their mileage alongside existing VED obligations, representing a significant shift in how electric vehicles are taxed in the United Kingdom.
