Budget 2009: Vehicle excise duty reformed

The government has announced a series of measures in this year’s Budget to reform vehicle excise duty in a bid to incentivise the purchase of lower-emission cars.

From May 2009, it will increase the number of vehicle excise duty bands from seven to 13 in order to provide drivers with a greater incentive to choose a lower-carbon car within their preferred class.

Two further measures will then come into effect in 2010. Firstly, the government will further separate out the 13 different bands. It will also introduce differential first-year rates of vehicle excise duty for new cars.

To ensure that the new rates and bands are clearly understood, the Department for Transport has worked with the Low Carbon Vehicle Partnership to update the fuel economy label for new cars. It is continuing to work with industry to develop a fuel economy label for the second-hand car market.