Vehicle excise duty for cars is one of those costs that looks trivial until a fleet orders fifty of the wrong car. For cars registered on or after 1 April 2017 the system has three moving parts: a CO2-banded first-year payment, a flat standard rate after that, and a list-price supplement that catches expensive cars for five years. Each part rewards a different buying decision.
The first tax payment, made when the vehicle is registered, is based on CO2 emissions and covers 12 months. The ladder runs from £10 for a zero emission car up through £115 for 1-50g/km, £560 at 111-130g/km, £1,410 at 131-150g/km, and on to £5,690 for anything over 226g/km. The shape of that table is the point: the first four bands are pocket money and the top four are a statement. Diesel cars carry an extra twist - those that do not meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide pay a higher rate within their band (at 51-75g/km, £280 against £135 for an RDE2-compliant or petrol equivalent). The manufacturer’s confirmation of RDE2 status, not the badge on the boot, settles it.
From the second tax payment the banding ends and the standard rate applies: £200 for a single 12-month payment, whether the car is petrol, diesel, electric or alternative fuel (hybrids, bioethanol, LPG). Direct Debit changes the arithmetic slightly - £210 spread over 12 monthly payments, or £105 every 6 months against £110 as a single payment. For fleet budgeting this is the stable line: after year one, a car costs £200 a year to tax until the supplement question below.
This is where fleet car policy goes wrong. You pay an extra £440 a year if the car or motorhome has a list price over £40,000 - or, for electric cars, over £50,000. The supplement runs for 5 years starting from the second time the vehicle is taxed. Three details in the rules decide real money:
Checking the list price with the dealer before ordering is not pedantry; it is the difference between a £200 car and a £640 car for half a decade.
Take a typical 130g/km diesel fleet car that meets RDE2: £455 in year one, £200 a year after that, and nothing more as long as the list price stays under £40,000. The same car at £41,000 list costs £640 a year for years two to six - the supplement alone exceeds the standard rate over its five-year run. And one class sits inside the same first-year framework: the CO2-banded first payment also applies to some motorhomes, so a camper conversion on a fleet chassis does not automatically dodge the ladder. After the first payment the tax falls due every 6 or 12 months, which is worth aligning with the fleet’s renewal cycle so the reminders land in the office rather than on a driver’s phone.
VED will never be the biggest number in a fleet car decision, but it is the most avoidable one - every pound of it is visible before the order is signed.