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Finance Act 2012

Background Note

11.The rate of Vehicle Excise Duty (VED) chargeable on vehicles is dependent on various factors including the vehicle type, engine size, date of first registration and exhaust pipe emissions data.  The rate applying to cars registered on or after 1 March 2001 is generally determined by the vehicle’s carbon dioxide emissions.  A reduced rate of VED applies to cars using alternative fuels or featuring a hybrid fuel-electric powertrain.  Alternative fuels include Liquefied Petroleum Gas, Compressed Natural Gas and high blend (at least 85 per cent content) bioethanol.

12.The rate applying to vans registered on or after 1 March 2001 is lower if the van met reduced pollution requirements early, that is, before certain emissions requirements became mandatory for new vans.

13.Cars and vans registered prior to March 2001, and all motorcycles, are taxed by reference to the engine size.

14.This year the Government intends to increase VED rates by no more than inflation.  VED rates for Heavy Goods Vehicles (HGVs) and buses are frozen.

15.The changes in rates apply to all vehicle licences taken out on or after 1 April 2012 regardless of the commencement date on the licence.

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