Motor Vehicles: Excise Duties

Treasury written question – answered on 1st December 2020.

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Photo of Ian Mearns Ian Mearns Chair, Backbench Business Committee, Chair, Backbench Business Committee

To ask the Chancellor of the Exchequer, whether he (a) plans to make an assessment of the effectiveness of the vehicle excise duty scheme and (b) has made an assessment of the potential merits of a scheme whereby the number of miles driven is a factor in the annual cost for the user.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary, Minister for Equalities

The Government uses the tax system to encourage the uptake of vehicles with low carbon dioxide emissions to help meet our legally binding climate change targets. This is why zero emission cars and electric vans are liable to pay no Vehicle Excise Duty (VED), either at first registration, or subsequently. At Budget 2020, the Government published a call for evidence on VED, which considers a range of changes to VED, including how to strengthen its environmental incentives. This closed in September and the Government will announce next steps in due course.

VED is a tax on vehicle ownership and, as such, does not vary with the number of miles driven. Motorists pay fuel duty on the petrol or diesel they purchase so those who complete significant mileage will pay more in fuel duty than those who drive fewer miles.

As with all taxes, the Government keeps VED under review. The Government is committed, as the UK transitions towards the phase out of new petrol and diesel cars and vans, that revenue from motoring taxes keeps pace with this change, to ensure it can continue to fund first-class public services and infrastructure. Any changes to the tax system will be considered by the Chancellor and any further steps will be announced in due course.

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