Chancellor John Healey has confirmed that the Treasury will introduce new Vehicle Excise Duty (VED) car tax bills for drivers from April 2027, following his Autumn Budget. VED rates are uprated every spring in line with inflation, and the Treasury has confirmed that 2027 will follow the same pattern.
Annual VED rates will rise for almost all petrol, diesel and electric car owners, with new rates set to come into effect from April 1. At this stage, there are no details on exactly how much bills will rise, but officials have stressed this will be in line with Retail Price Index (RPI) inflation as in previous years.
Treasury confirms RPI-linked increase
The VED increase was confirmed as the full Budget document was released by the Treasury following Mr Healey's speech in the House of Commons. In the report, the Treasury explains: "The government will uprate VED rates for cars, vans and motorcycles in line with the Retail Prices Index (RPI) from 1 April 2027."
Earlier this year, standard VED rates for cars built after 2017 increased from £195 to £200. This followed a similar £5 increase the year before.
Exemptions and discounts for specific vehicles
Vehicles built between 2001 and 2017 pay VED based on their overall vehicle emissions, with cars placed into one of 13 tax bands. Fees will also rise for cars built before 2001 based on the size of an engine, with historic tax exemptions only available for cars older than 40 years old.
From April 2027, it is expected that these exemption rules will include cars registered before 1987, in a boost to classic car owners. However, Treasury chiefs have confirmed that search and rescue vehicles will continue to be exempt from VED in the upcoming tax year.
HGV discount remains in place
Meanwhile, the temporary VED discount for heavy goods vehicles announced under Rachel Reeves will also remain in place. The update means HGVs will only pay £1 to use the roads between July 1, 2026 and June 30, 2027.
In his Budget statement, Mr Healey was keen to stress that Labour wanted to help motorists who relied on their cars. He said: "For millions of people the cost of living and the cost of doing business is the same. The home is the office and the van is the family car."
