Government to consult on reduced VED for low-emission vans

The government has launched a consultation on vehicle excise duty with the aim of incentivising greater uptake of low or zero emission vans.

Currently vehicle excise duty for vans remains at a flat rate of £250 no matter what type of vehicle. This consultation will look at changing this duty to encourage drivers to choose cleaner vans when purchasing a new van.

A separate call for evidence is looking at whether the reduced duty rate for red diesel is holding back the use of cleaner fuels by non-road vehicles and machinery in towns and cities – for example cranes or generators used on construction sites.

Red diesel, which accounts for 15 per cent of all diesel consumption in the UK, currently benefits from a reduced rate of 11.14p per litre compared to the standard charge of 57.95p. The call for evidence excludes red diesel used for agricultural purposes and for fishing vessels.

Exchequer Secretary to the Treasury, Robert Jenrick, said: “We want to be the first government to leave the environment in a better state that we found it. One of the ways we can do this is by using the tax system to help drivers afford greener choices.

"We want to help ‘white van man’ go green. We appreciate that buying a new van is a major investment for small businessmen and women and want to help make environmentally friendly choices more affordable.

“Public health is at risk due to the use of red diesel in towns and cities. So we are looking at how we can level the playing field on red diesel and exploring how we can encourage users to ditch it.”

The proposals on VED will explore creating a graduated first year rate for vans, as is already in place for cars. Most van purchases would pay less tax in the first year as a result of the change.