Vehicle Excise Duty (VED) increases for 2021.

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What is Vehicle Excise Duty (VED)?

Vehicle excise duty (VED) can also be known as vehicle tax, car tax or road tax. Vehicle excise duty (VED) is an annual tax that applies to most types of powered vehicles, which are either being used or parked on public roads in the UK. The amount of VED you pay is based on the amount of CO2 emissions produced by your vehicle. Therefore, more polluting vehicles could be paying more tax than drivers who produce less CO2 emissions. Fully electric and hydrogen fuel celled vehicles are currently exempt from paying VED, however this may change in the coming years.

This year, the amount of VED you pay will be as follows:

CO2 emissions (g/km) First year rate (petrol) First year rate (diesel)
Over 255£2245£2245

The standard rate to pay from the second year onwards, will be £155 a year for vehicles that are registered on or after 1 April 2017. This does not apply to vehicles with zero-emissions.

Additional Tax

Drivers will pay an additional tax, as with previous years, for vehicles that cost more than £40,000. This is charged annually and from April 2021, this increases to £335 a year for the next five years once your first-year tax runs out.

Company car tax (BiK) and fuel duty changes

Benefit-in-kind, also known as BiK, had previously been frozen since March 2020 but will resume in the next financial year starting from April 2021. For the first time, this year BiK will apply to electric and hydrogen fuel cell vehicles. Fuel duty tax is paid on petrol and diesel, but fuel duty rates will remain frozen for the next financial year.

2021 Clean Air Zone changes

Clean Air Zones (CAZ) plans were put on hold due to the coronavirus pandemic; however we expect to see these plans resuming throughout the year. Currently, the UK’s existing Clean Air Zone is in London and is called the Ultra-Low Emission Zone (ULEZ). To enter, drivers will have to pay £12.50 and any congestion fees that apply.

Terms and Conditions apply, for more information visit GOV.UK.

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