Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment her Department has made of the potential merits of reviewing (a) car and (b) other vehicle taxes to ensure non-emission producing vehicles are not charged higher rates than emission producing vehicles.

The Government uses the tax system to support a variety of objectives including our legally binding climate targets and the transition to electric vehicles (EVs).

From 1 April 2017, a reformed Vehicle Excise Duty (VED) system was introduced for new cars. The changes in April 2017 were applied to new cars only, meaning that the tax treatment of existing cars was not affected. Under the reformed VED system, new cars pay a variable first year rate according to the emissions of the vehicle, with the most polluting currently paying over £5,400, and zero emission models currently pay £10.

Since the introduction of the current VED system in 2017, standard rates have risen in line with inflation only, meaning drivers have not experienced a real terms increase.

At Autumn Budget 2024, the Government announced changes to the VED first year rates from 1 April 2025, to introduce higher rates for hybrid and petrol/diesel vehicles for 2025-26, and a freeze to the rate for zero emission vehicles until 2029-30.

The Budget also announced new company car tax rates for 2028-29 and 2029-30, which gradually increase the rates for both petrol/diesel and electric vehicles whilst restricting incentives for hybrid vehicles.

Cars are also treated according to their emissions under the capital allowances system; and company cars made available for private use are taxed according to their CO2 emissions under the benefit in kind regime.

Emissions-producing vehicles are generally subject to fuel duty, which is levied on petrol and diesel they use.