Labour will introduce a new £5,950 first-year Vehicle Excise Duty (VED) charge for the highest-polluting new cars from April 2027, following the Treasury's confirmation of an annual inflationary rise in rates. The increase, calculated by motoring specialists at Pete Bardem, affects petrol and diesel drivers and forms part of the government's annual VED uprating.
First-year rates to rise by hundreds of pounds
Cars emitting over 255g/km currently pay £5,690 in their first year on the road, but this is expected to rise by £260 next spring to reach £5,950. Fees for the highest-polluting models stood at just £2,745 in early 2025, meaning charges will have increased by more than £3,000 in just over 48 months.
First-year rates will also increase across the board. Owners of brand new cars emitting between 22 and 255g/km of CO2 face an increase from the current £4,850 to £5,070, a £220 rise. Meanwhile, cars emitting 191 to 225g/km will pay £3,575 in year one from April 2027, another rise on the current £3,420 fees.
Treasury confirms inflationary uprating
The VED price hikes were confirmed in the Treasury's Budget document, released just hours after Chancellor John Healey's speech in the House of Commons on Wednesday. The report states: "The government will uprate VED rates for cars, vans and motorcycles in line with the Retail Prices Index (RPI) from 1 April 2027."
Motorists may be relieved that this is a standard uprating in line with inflation, rather than a more substantial change. Rachel Reeves doubled first-year tax bands in April 2025, causing fees to soar by thousands of pounds.
Impact on motorists
Any tax rise is likely to be unpopular among motorists, with road users across the country already facing rising running costs, particularly fuel. In his Budget statement, Healey claimed he understood that motorists needed help with their finances, saying: "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."
