As promised by the Chancellor in his Spring Statement, the Government has put forward plans to introduce a new Vehicle Excise Duty (VED) system for new vans. The proposals are currently in consultation, and the Government’s stated aim is to ‘incentivise van drivers purchasing a new van to make the cleanest choices’. But what will these changes really mean for fleets and van drivers if they go ahead?
No change for existing vans
The first thing to note is that the changes would not affect any vans that are already on the road. These will still be subject to the existing VED system: a flat rate of £250 a year that applies to all vans, except for zero-emission ones which are exempt (and a small number of older vans that met the Euro 4 or Euro 5 emissions standards early, which pay a discounted rate of £140).
The proposed new system would only apply to newly registered vans. The Government hasn’t specified a date for the changes to take effect, but it does say that we should expect a decision in the Chancellor’s Budget this autumn.
Cleaner vans to pay less in their first year
The Government’s main proposal is to charge different VED rates for different vans in their first year of registration, depending on their carbon dioxide (CO2) emissions. The cleanest vans – those with zero emissions – would pay nothing, and the most polluting ones would pay the most. This mirrors the new system of first-year VED rates for cars that was introduced in April 2017.
The consultation document does not set out the CO2 bands that would be created or the rates that would apply. Instead, it provides two ‘illustrative examples’. In each case, the upshot is roughly the same: most new vans (those with emissions up to around 200g CO2/km) would pay less than they do under the current system, but a small number of the most polluting vans would have to pay more.
After the first year, all vans would revert to paying the standard rate (currently £250 a year but due to rise with inflation each year), with two exceptions: zero-emission vans would pay nothing, and those with emissions between 1 and 50g CO2/km would get a 50% discount.
Further changes for company vans?
The consultation document also hints at future changes for company vans that employees can use privately. It asks whether the Van Benefit Charge and the Van Fuel Benefit Charge ‘should also be transformed to use CO2 bands’. This would replace the current system of a single taxable value for company vans and bring it more into line with Company Car Tax, which has been tied to a car’s CO2 emissions since 2002.
What does this mean for you?
The main impact of these proposals would be to create a new incentive to choose low-emission vans – especially hybrid ones. Meanwhile, the upfront cost of buying a very high-emission van would increase by up to £250. There would be no change for fully electric vans, which are already exempt from paying VED and would continue to be so.
So, what do you think? You can read the full consultation document and submit your own response here. It’s open until 20 July. Make sure your views are heard.