The measure was first announced in 2015 and will affect purchasers of cars first registered from 1 April 2017 onwards.

The aim is to encourage the purchase of low-emission vehicles and under the new system, first year rates of vehicle excise duty (VED) will vary according to the carbon dioxide (CO2) emissions of the vehicle.

A flat standard rate of £140 will apply in all subsequent years, except for a £0 rate for zero-emission cars. Cars registered before 1 April 2017 will remain in the current VED system, which will not change.

Anyone purchasing a car above a list price of £40,000 will be most affected by the changes as they will have to pay a £310 supplement on top of standard VED rates for the first five years of ownership.

The revised road tax rates are expected to raise £195m in year one of operation 2017/18, rising to £1.4bn by 2020/21.

The current VED structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178 gCO2/km.

The Band A threshold of 100 gCO2/km below which cars pay no VED was introduced in 2003 when average new car emissions were 173 gCO2/km. Since then, to meet EU emissions targets average new car emissions have fallen to 125 gCO2/km.

Under the current system, the average annual VED across all UK motorists is £166. In the new system most motorists will be paying an annual VED payment of £140.

The new rates and bands for the post-2017 VED system are set out in the table below:

Source: HMRC