Rachel Reeves confirms £135 charge for drivers ahead of pay-per-mile rule

Chancellor Rachel Reeves has confirmed a first-year Vehicle Excise Duty (VED) rate of £135 for plug-in hybrids (PHEVs) emitting between 51g/km and 75g/km of CO2. This change accompanies revised emission testing under Euro 6e‑bis, which requires longer, more rigorous cycles and tends to push CO2 figures higher for many PHEVs. As a result, several models move into higher tax brackets, despite existing easements for certain company-car buyers. The government has also indicated that all VED rates will rise incrementally in 2026 to reflect the Retail Price Index, maintaining real-terms value. The method for evaluating CO2 output has changed to Euro 6e-bis, prolonging the tests for PHEVs and moving many models to higher bands.

Looking ahead, a pay-per-mile eVED regime is scheduled to launch in April 2028, charging electric-car drivers 3p per mile and PHEV drivers 1.5p per mile. Industry commentary notes that the new framework follows earlier VED shifts, including the 1‑50g/km band rising to £110 and the 51‑75g/km band to £135. The euro 6e-bis testing extended PHEV testing from about 497 miles to 1,367 miles, pushing many models into higher CO2 bands. An easement remains for company cars, shielding some costs during the transition.