Homepage Budget 2008: Chancellor increases VED differentials, scraps biofuels duty benefit Date: 12 March 2008 The Chancellor has announced a phased increase in Vehicle Excise Duty, rising to £950 a year for the highest carbon cars in 2010. Alistair Darling's first Budget also announces an increase in the number of VED bands, from 6 to 12. Other measures include the removal of the duty differential in favour of biofuels and a delay in the planned petrol/diesel duty increase. Mr Darling has increased the VED - 'car tax' - differential between the highest and lowest CO2-banded cars from £300 in 2007-8 to £400 in 2008-9. In 2009-10 the maximum differential will increase to £440 and in 2010-11 to £455, for cars purchased in prior years. However, for new cars purchased in 2010-11, the annual rate of VED will increase to £950 a year for cars emitting over 255g/km CO2. The lowest-banded cars will pay no VED. The Chancellor announced the introduction of 6 new VED bands: the A-to-G banding will be replaced by A-to-M. The highest new CO2 band - M -is for vehicles exceeding 255g/km CO2. The previous highest band - G - was for cars over 226 g/km. On biofuels, Mr Darling announced that the duty differential for renewable fuels will cease in 2010-11. He said that the Renewable Transport Fuel Obligation will from then provide the total support for biofuels. The duty differential in favour of liquefied petroleum gas (LPG) will be reduced by a penny per litre in each of the next three years while that in favour of compressed natural gas (CNG) will be maintained until 2010-11. Meanwhile, the planned increase in the main road fuel duty rates of 2p/litre which had been due to take place on 1 April 2008, is to be deferred until 1 October 2008 in view of the rapid recent rise in crude oil and product prices. The Chancellor has also announced changes to the tax regime in terms of the capital allowance treatment of business cars which will increase incentives for businesses to purchase lower carbon cars. The final report of the King Review of Low Carbon Cars, which was commissioned by the Treasury, has also been published alongside the Budget (full story to follow). Mr Darling announced the Government's support for the King Review recommendation that the European Union should tighten the regulatory cap on car emissions to 100 grams per kilometre of carbon dioxide by 2020. This represents an apparent strengthening of the UK Government's position. The Environment Secretary, Hilary Benn, had proposed a target of 100g/km CO2 by between 2020 and 2025 during a recent meeting of EU environment ministers. If you have any issues with the site or any feedback please click here Bioener G Ltd, Registered in England No. 5920136, Bletchley Park, Sherwood Drive, Bletchley, Milton Keynes. MK3 6EB Web Design Milton Keynes