Finance Act 2023

Taxation of vehicles U.K.

10 Removal of VED exemption for electrically propelled vehicles etc U.K.

(1) The Vehicle Excise and Registration Act 1994 is amended as follows.

(2) In Schedule 2 (exempt vehicles), in paragraph 20G (electrically propelled vehicles)—

(a) in sub-paragraph (2)—

(i) before paragraph (a) insert—

“(za) it is a light passenger vehicle (within the meaning of paragraph 1A(2) or 1GA(2) of Schedule 1),

(zb) it is a light goods vehicle (within the meaning of paragraph 1H(2) of that Schedule), or

(zc) it is a motorcycle (within the meaning of paragraph 2(3) of that Schedule).”, and

(ii) omit paragraphs (a) and (b), and

(b) omit sub-paragraph (3).

(3) In that Schedule omit paragraph 25 (light passenger vehicles with low CO₂ emissions) and the italic heading before it.

(4) In Schedule 1 (annual rates of duty)—

(a) omit paragraph 1GB (exemption from paying duty on first vehicle licence for certain vehicles) and the italic heading before it,

(b) in paragraph 1GE(1) (higher rates of duty for vehicles with a price exceeding £40,000) for paragraph (c) substitute—

“(c) either—

(i) the vehicle was so registered on or after 1 April 2025, or

(ii) it was so registered before that date and its applicable CO₂ emissions figure exceeds 0g/km.”, and

(c) in paragraph 2 (motorcycles)—

(i) in sub-paragraph (1)(a), after “centimetres” insert “or if the vehicle is electrically propelled”, and

(ii) in sub-paragraph (3), in the definition of “motorcycle”, after “vehicle” insert “of a description specified in regulations made by the Secretary of State”.

(5) In consequence of the amendments made by subsections (2) to (4), in Schedule 1—

(a) in paragraph 1 (rates where no other rate specified)—

(i) in sub-paragraph (2), after “case of” insert “an electrically propelled vehicle or”, and

(ii) in sub-paragraph (2A), after “case of” insert “an electrically propelled vehicle or”,

(b) in paragraph 1B (light passenger vehicles registered before 1 April 2017), in the Table, in column (1)—

(i) after “Exceeding” insert “, or, in the first row, equal to or exceeding”, and

(ii) for “100” substitute “0”,

(c) in paragraph 1GC (light passenger vehicles registered on or after 1 April 2017)—

(i) in Table 1, in column (1), after “Exceeding” insert “, or, in the first row, equal to or exceeding”, and

(ii) in Table 2, in column (1), after “Exceeding” insert “, or, in the first row, equal to or exceeding”,

(d) in paragraph 1J (annual rate of duty for light goods vehicles)—

(i) in paragraph (a), after “van” insert “or a pre-2011 electric van”, and

(ii) in paragraph (b), after “van” insert “or a pre-2011 electric van”, and

(e) after paragraph 1M insert—

“1N For the purposes of paragraph 1J, a vehicle to which this Part of this Schedule applies is a “pre-2011 electric van” if—

(a) the vehicle is first registered, under this Act or under the law of a country or territory outside the United Kingdom, on or after 1 March 2003 and before 1 January 2011, and

(b) the vehicle is an electrically propelled vehicle.”

(6) The Graduated Vehicle Excise Duty (Prescribed Types of Fuel) Regulations 2001 (S.I. 2001/93) are revoked.

(7) The amendments and revocation made by this section have effect in relation to licences taken out on or after 1 April 2025.

11 Taxable benefits: appropriate percentage for cars with a CO₂ emissions figure U.K.

(1) In the Income Tax (Earnings and Pensions) Act 2003, in section 139 (cars with a CO₂ emissions figure: the appropriate percentage), for the table in subsection (1) substitute—

“Car	Appropriate percentage
Car with CO2 emissions figure of 0	3%
Car with CO2 emissions figure of 1–50	As follows
Car with electric range figure of 130 or more	3%
Car with electric range figure of 70–129	6%
Car with electric range figure of 40–69	9%
Car with electric range figure of 30–39	13%
Car with electric range figure of less than 30	15%
Car with CO2 emissions figure of 51–54	16%
Car with CO2 emissions figure of 55–59	17%
Car with CO2 emissions figure of 60–64	18%
Car with CO2 emissions figure of 65–69	19%
Car with CO2 emissions figure of 70–74	20%”

(2) The amendment made by subsection (1) has effect for the tax year 2025-26.

(3) In that Act, in that section, in subsection (3)(a) for “20%” substitute “21%”.

(4) The amendment made by subsection (3) has effect for the tax year 2025-26 and subsequent tax years.

(5) In that Act, in that section, for the table in subsection (1) of that section (as substituted by subsection (1)) substitute—

“Car	Appropriate percentage
Car with CO2 emissions figure of 0	4%
Car with CO2 emissions figure of 1–50	As follows
Car with electric range figure of 130 or more	4%
Car with electric range figure of 70–129	7%
Car with electric range figure of 40–69	10%
Car with electric range figure of 30–39	14%
Car with electric range figure of less than 30	16%
Car with CO2 emissions figure of 51–54	17%
Car with CO2 emissions figure of 55–59	18%
Car with CO2 emissions figure of 60–64	19%
Car with CO2 emissions figure of 65–69	20%
Car with CO2 emissions figure of 70–74	21%”

(6) The amendment made by subsection (5) has effect for the tax year 2026-27.

(7) In that Act, in that section, for the table in subsection (1) of that section (as substituted by subsection (5)) substitute—

“Car	Appropriate percentage
Car with CO2 emissions figure of 0	5%
Car with CO2 emissions figure of 1–50	As follows
Car with electric range figure of 130 or more	5%
Car with electric range figure of 70–129	8%
Car with electric range figure of 40–69	11%
Car with electric range figure of 30–39	15%
Car with electric range figure of less than 30	17%
Car with CO2 emissions figure of 51–54	18%
Car with CO2 emissions figure of 55–59	19%
Car with CO2 emissions figure of 60–64	20%
Car with CO2 emissions figure of 65–69	21%
Car with CO2 emissions figure of 70–74	21%”

(8) The amendment made by subsection (7) has effect for the tax year 2027-28 and subsequent tax years.