Cars: Excise Duties

Treasury written question – answered on 21st April 2021.

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Photo of Margaret Ferrier Margaret Ferrier Independent, Rutherglen and Hamilton West

To ask the Chancellor of the Exchequer, whether he has made an assessment of the potential merits of reducing Vehicle Excise Duty for cars initially priced in excess of £40,000 that are being resold second-hand.

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

Petrol, diesel and hybrid cars with a list price when new exceeding £40,000 pay an additional Vehicle Excise Duty (VED) supplement for five years as well as paying the standard rate of VED, which means those who can afford the most expensive cars pay more than the standard rate imposed on other drivers. As around 88% of all new cars have a list price below £40,000, this was considered a suitable threshold for distinguishing the luxury end of the market.

With regard to used vehicles, whilst the sale price of these cars may be below £40,000, the additional supplement is based solely on the original list price, which provides a clear and easy to understand measure of a car’s value as published by manufacturers. As the additional supplement is only payable for five years, slightly older cars pay the supplement for a shorter period of time.

As with all taxes, VED remains under review and any changes are considered by the Chancellor.

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