Rules to measure carbon dioxide emissions for Vehicle Excise Duty
Published 11 July 2019
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Who is likely to be affected
This measure affects all motorists choosing a new car from 1 April 2020.
General description of the measure
As announced at Autumn Budget 2017, this measure confirms that the carbon dioxide (CO2) emissions figure for Vehicle Excise Duty will be based on the Worldwide Harmonised Light Vehicle Testing Procedure (WLTP) for all new cars registered from 1 April 2020.
All cars registered before 1 April 2020 will continue to use existing New European Driving Cycle (NEDC) CO2 values for Vehicle Excise Duty purposes.
Policy objective
As the WLTP is more representative of real-world driving conditions, this measure ensures Vehicle Excise Duty is based on a more robust regime for measuring CO2 emissions.
The government expects the WLTP to allow motorists to make more informed purchasing decisions when considering the CO2 impact of their new car.
Background to the measure
Currently, on first registration new cars are liable to pay Vehicle Excise Duty based on CO2 emission figures provided under the NEDC test procedure.
The WLTP testing standards were introduced for new registrations in September 2017. From this date, EU legislation required car manufacturers to report CO2 emissions figures from both the NEDC test procedure and the WLTP.
At Autumn Budget 2017, the government announced that Vehicle Excise Duty would be based on the WLTP for new cars from 1 April 2020. Legislation was also introduced in Finance Bill 2017-18 to clarify that the NEDC test procedure figures should be used for Vehicle Excise Duty purposes, where more than one emissions figure is recorded, until April 2020.
At Budget 2018, the government announced a review of the impacts of the WLTP on vehicle taxes. A summary of responses and the government’s policy decisions were published on 9 July 2019.
Detailed proposal
Operative date
This measure will have effect for new cars first registered from 1 April 2020.
All cars registered before April 2020 will maintain their existing tax treatment.
Current law
References to CO2 emission figures are included in Schedules 1 and 2 of the Vehicle Excise and Registration Act 1994.
The current legislation specifies that where more than one emissions figure is recorded, the WLTP value should be ignored.
Proposed revisions
Finance Bill 2019 introduces primary legislation to clarify that all new cars registered from 1 April 2020 will be taxed according to their CO2 emissions figure measured under the WLTP system. Any CO2 emissions figure recorded under the NEDC system should be ignored.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
The Office for Budget Responsibility included the impact of this measure in their forecast at Budget 2018.
Economic impact
This measure is not expected to have any significant macro-economic impacts.
Impact on individuals, households and families
This measure is expected to impact an expected 2 million individuals taking up a new car each year. These individuals will need to familiarise themselves that for Vehicle Excise Duty purposes, the CO2 emissions figure will be determined under the WLTP system.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will have a negligible impact on businesses taking up a new car from 1 April 2020. Businesses will have a one-off cost of familiarisation to understand that for Vehicle Excise Duty purposes, CO2 emissions will be determined under the WLTP system. There are not expected to be any ongoing costs. This measure is not expected to impact civil society organisations.
Operational impact (£m) (HMRC or other)
There will be a negligible financial impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA).
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be evaluated and monitored through DVLA licensing data.
Further advice
If you have any questions about this change, contact the Energy and Transport Taxes Team by emailing: [email protected].