"UK motorists are facing higher vehicle ownership costs after Chancellor Rachel Reeves confirmed changes to Vehicle Excise Duty (VED) that will increase charges from April 2026. The policy, implemented through HM Treasury fiscal reforms, forms part of a wider transition toward emissions-based transport taxation as fuel duty revenues decline. Officials say the system is designed to balance climate targets with long-term funding for road infrastructure. The steepest increases will affect motorists buying high-pollution cars."
"The policy continues the Government's strategy of widening the tax gap between: The aim is to incentivise the purchase of lower-carbon vehicles while discouraging the sale of heavily polluting models. Additional cost pressure will fall on diesel vehicle buyers if their cars fail to meet the Real Driving Emissions 2 nitrogen oxide performance requirement. Under the new structure: Diesel vehicles meeting RDE2 standards will face relatively standardised charges Non-compliant diesel engines will be placed into higher tax bands Emissions between 1g/km and 255g/km will attract differentiated pricing"
From April 2026, Vehicle Excise Duty (VED) will rise under HM Treasury fiscal reforms, shifting toward emissions-based transport taxation as fuel duty revenues decline. First-year registration charges for vehicles emitting more than 76g/km CO₂ could approach £5,690 after inflation indexation. The structure widens the tax gap to incentivise lower-carbon vehicle purchases and deter heavily polluting models. Diesel buyers with engines failing Real Driving Emissions 2 (RDE2) nitrogen oxide standards will face higher tax bands while compliant diesels face standardised charges. Zero-emission cars retain low duty until about 2029–2030, and distance-based road pricing is being examined.
Read at London Business News | Londonlovesbusiness.com
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