Vehicle Excise Duty rates for cars, vans and motorcycles — from 1 April 2025
Published 30 October 2024
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Who is likely to be affected
Owners of cars, vans, motorcycles and holders of motorcycle trade licences who will be liable for Vehicle Excise Duty from 1 April 2025.
General description of the measure
This measure will uprate the Vehicle Excise Duty standard rates for cars, vans, motorcycles and motorcycle trade licences (excluding the first-year rates for cars) by the Retail Price Index, and will reflect the inclusion of zero-emission vehicles in Vehicle Excise Duty from 1 April 2025. This is a standard uprating to come into effect from 1 April 2025.
Policy objective
Increasing Vehicle Excise Duty rates by Retail Price Index in 2025 to 2026 will ensure that Vehicle Excise Duty receipts are maintained in real terms.
Background to the measure
This measure was announced at Autumn Budget 2024.
Vehicle Excise Duty is a tax on vehicle ownership, and rates depend on the vehicle type and first registration date. Vehicle Excise Duty rates have increased in line with inflation since 2010.
From 1 April 2025, zero-emission vehicles will be subject to Vehicle Excise Duty. Further information about how Vehicle Excise Duty will apply to zero emission vehicles can be found in the tax information and impact note titled ‘Introduction of Vehicle Excise Duty for zero emission cars, vans and motorcycles from 2025’.
From the second year of registration onwards, zero-emission cars will move to the standard annual rate.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2025 for all cars, vans, motorcycles and motorcycle trade licences.
Current law
Section 1 of the Vehicle and Registration Act 1994 provides for the charging of Vehicle Excise Duty.
Section 2 of Vehicle and Registration Act 1994 provides that Vehicle Excise Duty in respect of a vehicle of any description is chargeable by reference to the applicable rate specified in Schedule 1 to Vehicle and Registration Act 1994.
Proposed revisions
Legislation will be introduced in Finance Bill 2024-25 to amend the applicable rates for cars, vans, motorcycles and motorcycle trade licences specified in Schedule 1 to Vehicle and Registration Act 1994. Full details of the new rates are given in Annex A to the Overview of Tax Legislation and Rates.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
The measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will impact on motorists owning a car, van or motorcycle or using a motorcycle trade licence. The increase in Vehicle Excise Duty rates is in line with Retail Price Index meaning rates will remain unchanged in real terms for vehicle owners.
The measure is not expected to impact on family formation, stability or breakdown.
Customer experience is expected to remain broadly the same as this measure does not make any changes to the operation of any tax processes.
Equalities impacts
Individuals liable for Vehicle Excise Duty standard rates will be represented in each of the groups with a shared protected characteristic. Where protected groups are overrepresented, the measure will have a disproportionate impact on that group. Males are overrepresented in the populations who own privately licensed cars (59%), light goods vehicles (89%) and motorcycles (95%) compared to females. This contrasts to the wider UK adult population, where males and females are equally represented. HMRC does not hold data on the other protected characteristics of people who own cars and therefore cannot determine if there are any other equality impacts.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses and civil society organisations which own or sell vans, car or motorcycles, by changing their Vehicle Excise Duty liabilities.
One-off costs will include familiarisation with the rate change. There are not expected to be any continuing costs.
Customer experience is expected to remain broadly the same as this measure does not make any changes to the operation of any tax processes.
Operational impact (£ million) (HMRC or other)
There will be 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 monitored through the DVLA vehicle licensing data, as well as through regular communication with relevant stakeholders across government and in industry.
Further advice
If you have any questions about this change, contact the Energy and Transport Taxes team by email: [email protected].