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The structure of vehicle tax (vehicle excise duty) will be reformed from 2009, to reward drivers of more fuel efficient cars and encourage them to consider the environmental performance when buying a new car.

• Changes to Vehicle Tax from April 2010

• The cost of vehicle tax

Update 16 July 2008 - fuel duty increase postponed

The Chancellor of the Exchequer, Alistair Darling MP, has announced that he is postponing the 2 pence per litre increase in fuel duty that was expected to take place on 1 October 2008.

As a result of this decision, main road fuel duty rates will remain at 50.35 pence per litre after 1 October this year.

• Fuel duty increase postponed

Car tax rates and bandings

The structure of vehicle tax (vehicle excise duty) will be reformed from 2009, to reward drivers of more fuel efficient cars and encourage them to consider the environmental performance when buying a new car.

More tax bands

New, smaller bands will be introduced from 1 April 2009 (for cars registered after 1 March 2001), so that a small change in carbon dioxide (CO2) emissions has a bigger effect on the cost of vehicle tax. These changes include:

• reduced rates for cars that emit up to 150g of CO2 per km
• increased rates for the most polluting cars
• a new top band for cars that emit more than 255g of CO2 per km

Alternative fuel cars will receive a discount of £20 (bands A to I) or £15 (bands J to M) in 2009-10, and £10 (all bands) in 2010-11.

First year rates

There will also be a new rate for the first year of owning a new car from 1 April 2010, with higher rates for the most polluting cars.

For the least polluting new cars, which emit 130g of CO2 per km or less, the first year rate will be zero. For new cars that emit between 131 and 160g of CO2 per km, the first year rate will be the same as the standard rate.

Vehicle excise duty bands and rates from 2009

Band	CO2 (g/km)	2009-10 standard rate	2010-11 first year rate	2010-11 standard rate
A	Up to 100	£0	£0	£0
B	101-110	£20	£0	£20
C	111-120	£30	£0	£35
D	121-130	£90	£0	£95
E	131-140	£110	£115	£115
F	141-150	£120	£125	£125
G	151-160	£150	£155	£155
H	161-170	£175	£250	£180
I	171-180	£205	£300	£210
J	181-200	£260	£425	£270
K	201-225	£300	£550	£310
L	226-255	£415	£750	£430
M	Over 255	£440	£950	£455

2008-09 rates

Changes to vehicle tax rates apply to tax discs taken out from 13 March 2008. For full details, see 'The cost of vehicle tax'.

• The cost of vehicle tax (motoring section)

• The cost of vehicle tax for cars, motorcycles, light goods vehicles and trade licences (motoring section)

Fuel duty - increase delayed

The planned fuel duty increase of 2 pence per litre in April 2008 will be delayed until 1 October 2008.

Main road fuel duty rates will rise by 1.84 pence per litre on 1 April 2009, and will then increase by 0.5 pence per litre above inflation on 1 April 2010.