Budget: new 13-band VED system

From 2009 road tax expands by six bands

Businesswoman considers the changes announced to VED rates and the new Showroom Tax

VED and ‘showroom tax’: business implications

The banding groups for Vehicle Excise Duty (VED) expands in 2009. VED is sometimes referred to as road tax.

Groups A-G have been joined by bands H to M.

At the same time the standard rate for cars with emissions below 150g/km reduces; while cars with higher emissions will pay more - as much as £440 for cars with emissions above 255g/km.

The following year, an additional tax over and above the standard VED rate is payable on new cars - a “showroom tax” . This will affect cars with emissions above 130g/km, the tax ranging from £115 to £950.

Alternative fuel cars - such as the Honda Civic Hybrid and Toyota Prius - have a discount of £20 (2008/09); and £10 (2009/10).

Go to our Law & Tax section to see the new VED rates in tabular form.

How will this affect your business motoring?

In most cases it is likely to increase the cost modestly. But not always. The key thing will be to time a replacement vehicle before the “showroom tax” kicks in. Let's take some examples over three years.

Honda Civic Hybrid (hybrid qualifies for discount), 109g/km