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PRE-BUDGET '08: VED changes cut the benefit of low-CO2 cars

Date: 24 November 2008

The Pre-Budget Report has reversed some of the previously announced Vehicle Excise Duty incentives for choosing low-CO2 cars.

In March's Budget, the Chancellor announced April 2009 rates ranging from £20 per year for cars between 101-110g/km rising to £440 for cars over 225g/km. The gaps have now been narrowed to £35-£405 at the expense of less-polluting models.

The following year will see reductions in VED of £15-£30 for cars below 141g/km, and increases of £5-£30 per year for models over 150g/km.

The so-called 'showroom tax' on new vehicles is, though, confirmed. From April 2010, new models under 131g/km will be exempt from VED from the first year, but a stepped series of bands will see drivers of cars over 255g/km pay VED of £950 in the first year before reverting back to £435 in the car's second year of life.

The Government has also confirmed its 2009 alternative fuel discount of £20 on cars below 186g/km and £15 for those above it, dropping to £10 on all models in 2010.