What does Schedule 1 paragraph 4B of the Vehicle Excise and Registration Act 1994 do?

Paragraph 4B establishes a graduated vehicle excise duty system for light passenger vehicles first registered on or after 1 March 2001. Instead of a flat rate or engine-size-based charge, the annual road tax is determined by the vehicle's certified CO2 emissions figure in grams per kilometre, as recorded on the registration certificate.

How do the CO2 emissions bands determine vehicle excise duty rates in the United Kingdom?

Vehicles are placed into emissions bands based on their CO2 output measured in grams per kilometre. Each band has a corresponding annual duty rate, with the lowest-emission vehicles paying the least and highest-emission vehicles paying the most. The precise thresholds and rates are updated periodically, typically through the annual Finance Act.

Do alternatively fuelled vehicles pay less vehicle excise duty under paragraph 4B?

Yes, the legislation differentiates by fuel type within each emissions band. Vehicles using alternative fuels — those not powered solely by petrol or diesel — may qualify for a reduced rate of duty compared to conventionally fuelled equivalents in the same CO2 band, encouraging the take-up of vehicles with lower overall environmental impact.

What are the practical implications of graduated vehicle excise duty for businesses and fleet costs?

For businesses budgeting fleet costs or advising on vehicle acquisitions, annual road tax is directly linked to the car's certified CO2 emissions on the V5C registration document. Choosing lower-emission vehicles reduces road tax and may also lower other vehicle-related taxes, such as the company car benefit charge, creating tangible cost savings.

Vehicle Excise and Registration Act 1994 schedule 1 paragraph 4B

Graduated rates of vehicle excise duty for light passenger vehicles based on CO2 emissions

Schedule 1 paragraph 4B establishes the graduated rates of vehicle excise duty (road tax) for light passenger vehicles registered on or after 1 March 2001, where the rate payable depends on the vehicle's carbon dioxide (CO2) emission level and fuel type.

Light passenger vehicles first registered on or after 1 March 2001 are taxed according to their CO2 emissions figure, as recorded on the vehicle registration certificate, rather than at a flat rate.
Vehicles are grouped into emissions bands, with lower-emission vehicles paying less duty and higher-emission vehicles paying more, creating a financial incentive to choose cleaner vehicles.
A distinction is made between vehicles using different fuel types, so that vehicles meeting certain alternative fuel criteria may qualify for reduced rates compared to conventionally fuelled equivalents.
This graduated system replaced the previous engine-size-based approach for eligible vehicles, aligning vehicle taxation more closely with environmental impact.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member