A reduced rate of Vehicle Excise Duty (VED) of £100 for cars with engines up to 1,100 cc will be introduced from 1 June 1999. The VED rate for all private and light goods vehicles will be increased by £5 to 2155 from 10 March 1999.

From Autumn 2000, a system of VED for new cars, based on emissions of carbon dioxide, will be introduced.

The Budget also included:

  a freeze in most lorry VED rates for the second year running

  a doubling to £1,000 of the maximum VED discount for low emission lorries and buses

  a simplification of plating procedures, a long-standing haulage industry request

  fuel duty incentives for cleaner fuel

  a 55% reduction in the VED rate for some vehicles engaged in combined road-rail transport

  higher rates of VED for recently-introduced classes of lorry, to discourage the use of vehicles with heavier, 11.5-tonne, axle weights.

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