As part of the Budget announcement earlier this month, the Government confirmed that the rate of Vehicle Excise Duty would increase. This rise will apply to cars, vans and motorcycles in line with the rate of inflation (RPI) from April 1, 2023.
However, to support the haulage sector, VED for heavy goods vehicles (HGVs) would remain frozen for 2023-24.
The Retail Price Index is currently at 10.1 percent, which will be reflected with the increase in car tax, with the sums being rounded to the nearest £5.
The standard rate, which drivers pay from year two after the car was first registered, will increase from £165 to £180.
Drivers who purchase a car with a list price of over £40,000 at first registration will also pay the additional standard rate.
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This applies for five years from the start of the second licence and includes an additional charge of £390, up from £355 last year.
Those paying through Direct Debit in monthly instalments will pay a more expensive charge for the standard rate, with 12 monthly instalments and two six-month payments costing £535.50, rather than £510.
Vehicles with higher emission levels will see the first year VED cost be much higher, potentially up to more than £2,600.
The highest rate of tax any driver will pay is if their car produces over 255g/km of CO2, rising from £2,365 last year to a whopping £2,605 this year.
Those who use alternative fuel cars, like biofuels, will see a slight saving of £10, with the VED coming in at £2,595.
If a vehicle was registered between March 2001 and April 2017, they are required to adhere to the old system of car taxation.
This ranked drivers on bands ranging from A to M and is divided into smaller emissions categories, as electric cars were not yet as prevalent.
For these vehicles, there is no first-year cost, with drivers paying a single annual rate every year, depending on their emissions output.
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The Government said it would do this to ensure all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate.
Any new zero emission cars registered on or after April 1, 2025, will be liable to pay the lowest first-year rate of VED, which is still £10.
Classic or historic vehicles are eligible for a tax exemption once it reaches 40 years old.
For example, a driver can stop paying vehicle tax from April 1, 2023, if the vehicle was built before January 1, 1983.
Motorists must still tax the classic vehicle, even if they do not have to pay, in order to keep it on the road.
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