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Legal guide to UK motoring, sections for law enforcement, Driver licensing, learner and new drivers, buying and selling, speeding fines, owning a vehicle, wheel clamping, traffic information.
The 2007 Budget Changes to Cost of Vehicle Tax
On Wednesday 22nd March 2007 the Chancellor made the following announcement regarding Vehicle Excise Duty (VED) –

Cars registered on or after 1st March 2001 which fall into Band A (CO2 emissions up to 100 g/km) will attract a nil rate of duty.

Cars registered on or after 1st March 2001 which fall into Band B (CO2 emissions 101 – 120 g/km) will have their annual rate of duty reduced by £35.00

Cars registered on or after 1st March 2001 which fall into Band C (CO2 emissions 121 – 150 g/km) will have their annual rate of duty reduced by £5.00

Cars registered on or after 1st March 2001 which fall into Band D (CO2 emissions 151 - 165 g/km) and E (CO2 emissions 166 – 185 g/km) will remain at the current rate.

Cars registered on or after 1st March 2001 which fall into Band F (CO2 emissions 186 and above) will have their annual rate of duty increased by £25.00 for Diesel and Petrol Cars, Alternative Fuel Cars will have their annual rate increased by £20.00.

A new emission band has been introduced for vehicles newly registered from 23rd March 2006. Band G will encompass CO2 emissions figures 226 g/km and above.

The following table is based on the new annual rate from 23rd March 2006 for cars registered after 1st March 2001
BAND CO2 Diesel Car Petrol Car Alternative Fuel Car
A Up to 100 £0.00 £0.00 £0.00
B 101 - 120 £50.00 £40.00 £30.00
C 121 - 150 £110.00 £100.00 £90.00
D 151 - 165 £135.00 £125.00 £115.00
E 166 - 185 £160.00 £150.00 £140.00
F 186 + above £195.00 £190.00 £180.00
Vehicles registered on or after 23rd March 2006
BAND CO2 Diesel Car Petrol Car Alternative Fuel Car
G Over 225 £215.00 £210.00 £200.00

The Alternative fuel category will be extended to include cars, which are capable running on bioethanol (at least 85%) which is also known as E85 or “Flex Fuel”.

Vehicles with an engine capacity of 1549 or above (registered before the 1st March 2001) which fall into the Private Light Goods tax class will have their annual rate of duty increased by £5.00 to £175.00

Vehicles registered on or after 1st March 2001 which fall into the Light Goods Vehicles tax class will have their annual rate of duty increased by £5.00, to £170.00

The Euro 4 Light Goods Vehicles tax class (light goods vehicles registered on or after 1st March 2003, which have EURO 4 status) will close as of 31st December 2006 to new registrations.

Vehicles registered in the Motorcycle tax class will see an increase in VED in line with inflation. The new annual rates are as follows –

Motorcycles Tricycles
Not over 150cc – no change £15.00
151 – 400cc - £31.00
401 – 600cc - £46.00
Over 600cc - £62.00
Not over 150cc – no change £15.00
All other tricycles - £62.00
Please note – These changes take effect from 23rd March 2006.

Questions and Answers

1) How do I know which tax class my vehicle falls under?

You can check tax class, engine capacity and CO2 emissions on your V5C registration certificate – section 4 or on the front of the older style V5 registration document. Further information on current rates of duty can be found here

2) Because my licence disc is now free, do I still have to apply for and display a disc?

Yes. Even though your tax disc is free, the law requires you to display a nil licence and also to make a Statutory Off Road Notification (SORN) if you intend to keep your vehicle unlicensed and off the road.

3) My tax rate has been reduced because of the Budget. Can I apply for a new disc at the reduced rate and then claim a refund on my current disc. How long will it take?

Yes. There is nothing to stop you applying for a refund on your current disc and relicensing at the new reduced rate from March 23rd. You can get a refund for each full calendar month still to run on the licence disc at the time you apply. If you require a refund on your current disc please use application form V14. V14’s are available for download from the forms page or from any Post Office® branch that issue tax discs and DVLA Local Offices. Your refund should be sent to you within 3 – 6 weeks. For further information on refunds can be found here.

4) Why are vehicles with high CO2 emissions being subjected to increased duty?

VED was reformed in 2001 to provide signals for motorists to buy cleaner cars. VED acts as a signal to motorists to give consideration to environmental impacts and to make informed purchasing choices. The reforms announced in this Budget will further develop VED’s environmental focus.

5) Why introduce the new band?

The reforms announced in this Budget will further develop VED’s environmental focus, especially the introduction of the new top band for the most polluting cars and the new zero rate for the lowest polluting cars.

6) Why are pre 2001 registered vehicles with an engine capacity of 1549 or above been subjected to increased duty when the lower rate remains the same?

The intention is to encourage people to drive cleaner, more fuel-efficient vehicles.

7) What is flex-fuel and can I convert my car to this?


E85 (sometimes known as Flex-fuel) is a mixture of bioethanol and unleaded petrol where the proportion of bioethanol by volume is at least 85%. There are currently only two models of vehicle on sale in this country that run on this type of fuel. Flex-fuel only applies to vehicle constructed to run on this fuel.

8) Why are you increasing motorcycle tax, when a motorcycle is more environmentally friendly than a car?

Decisions on VED are a matter for the Chancellor who weighs up many factors when deciding on rates of VED and he has decided to increase the rates for motorcycles in line with inflation.

9) Why close the Euro IV tax class?


The Euro IV standard becomes a legal requirement from the 1st October 2006 and it would not be appropriate to offer an incentive to meet what will be a legal requirement. Euro IV emissions standards for vans will become mandatory for all vans registered after 31 December 2006. The reduced rate of VED for Euro IV vans will be removed for vans registered after that date, but remain for the life of vans meeting the requirements registered before that date.

10) Will I be entitled to a reduced rate of duty if I convert my vehicle to run on Liquid Petroleum Gas (LPG)?

Yes, if your vehicle was registered on or after 1 March 2001 it would qualify for the Alternative Fuel Car Taxation class which attracts a reduced rate of duty in Graduated Vehicle Excise Duty Scheme. You will need to provide evidence of the conversion in the form of a receipt from the garage/converter. In order to change the taxation class you will need to contact your nearest DVLA local office.
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