BUDGET ’07: VED changes in full

Gordon Brown has raised the level of Vehicle Excise Duty on petrol and diesel cars producing 226g/km CO2 (band G) by £90 to £300 with immediate effect and has promised to raise this by a further £100 to £400 on 1 April 2008. Band G will then be frozen for two years.

At the same time cars producing between 101 and 120g/km CO2 (band B) have had their VED cut to £35 with immediate effect. The zero rate of road tax for cars emitting 100g/km CO2 or less remains unchanged.

Bands C to E will see an increase of £15 for petrols and £5 for diesels bringing the two fuels inline with each other. The Chancellor will also raise bands C-E by £5 in each of the next three years.

Band F sees a rise of £10 in 2007-08, then £5 in each of the subsequent two years.

The Budget Report said: “As with fuel duty rates, the Government today announces VED rates for this year and the next two years to further sharpen environmental signals to motorists to purchase more fuel efficient vehicles and continue to support the development of low-carbon market.”

The Government said it had equalized the VED on petrol and diesel cars because both would have to meet the same stringent upcoming Euro5 emissions regulations.