Vehicle Excise Duty rates for cars, vans motorcycles and trade licenses from April 2021
Published 3 March 2021
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Who is likely to be affected
Owners of cars, vans, motorcycles, and holders of motorcycle trade licences.
General description of the measure
This measure will uprate, by the Retail Prices Index (RPI), the Vehicle Excise Duty rates for cars, vans, motorcycles and motorcycle trade licences. This is a standard uprating to come into effect from April 2021.
Policy objective
Increasing Vehicle Excise Duty rates by RPI in 2021 to 2022 will ensure that Vehicle Excise Duty receipts are maintained in real terms and that motorists make a fair contribution to the public finances.
Background to the measure
This measure was announced at Budget 2021.
Vehicle Excise Duty is paid 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.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2021 for all cars, vans, motorcycles, heavy goods vehicles and motorcycle trade licences.
Current law
Section 1 of the Vehicle and Registration Act (VERA) 1994 provides for the charging of Vehicle Excise Duty.
Section 2 of VERA 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 of VERA.
Proposed revisions
Legislation will be introduced in Finance Bill 2021 to amend the applicable rates for cars, vans, motorcycles and motorcycle trade licences specified in Schedule 1 of VERA. Full details of the new rates are given in Annex A to the Overview of Tax Legislation and Rates.
Summary of impacts
Exchequer impact (£m)
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| - | 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 economic 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 RPI meaning rates will remain unchanged in real terms.
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 the tax.
Equalities impacts
This measure will affect those with protected characteristics who are registered keepers of cars in the same way as it affects all keepers of cars.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses, which own or sell vans, car or motorcycles by a change in their Vehicle Excise Duty liabilities. One-off costs include familiarisation with the rate change. There are not expected to be any ongoing costs.
There is expected to be no impact on civil society organisations.
Customer experience is expected to remain broadly the same as this measure does not make any changes to the operation of the tax.
Operational impact (£m) (HMRC or other)
There will be negligible financial impact on operational costs for the Driver and Vehicle Licensing Agency (DVLA) and no additional administrative costs for affected car, van or motorcycle drivers.
Other impacts
Vehicle Excise Duty is designed to encourage the uptake of lower emission vehicles, so this measure will maintain the environmental signal as it will increase Vehicle Excise Duty rates in line with inflation.
Other impacts have been considered and none has been identified.
Monitoring and evaluation
This measure will be evaluated and 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 at: [email protected].