From tomorrow (April 1st), motorists buying new cars will be subject to a brand new first-year rate of vehicle excise duty (VED), which is designed to encourage buyers to opt for low-emission models.

All new cars in their first year of registration will have the one-off tax imposed upon them, based upon the CO2 levels they emit.

Drivers will pay the first-year rate of VED when they purchase their vehicle then new standard rates for each subsequent year, which are all calculated on emissions levels too.

Cars emitting 121g/km to 130g of CO2 will see a first-year reduction of up to £120 on current rates and, according to 2009 sales, they account for approximately 7.2 per cent of the new car sales market.

Although the Society of Motor Manufacturers and Traders (SMMT) hoped the government would scrap the new VED rates, it did make some announcements related to manufacturing, particularly in the low-carbon industry.

One of the proposed changes was for company car tax, which has been lowered by the government to five per cent for any vehicles emitting between one and 75g/km of CO2.

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