New Vehicle Excise Duty (VED) rates for vans could mean cheaper tax bands being introduced for cleaner vehicles.

The government has launched a consultation on new VED rates for vans, which was initially announced by chancellor of the exchequer Philip Hammond in his Spring Statement earlier this year.

Currently, VED is charged at a flat rate of £250 for all vans, but the consultation will look at changing this to more closely resemble the system for cars, where less tax is paid in the first year of ownership on vehicles which emit less CO2.

The government says under an altered scheme, most van purchases would incur less tax in the first year than they do currently.

It also wants to encourage the purchase of ultra-low emission vans, which in 2016-17 accounted for only 0.4% of the market.

Consultation participants will be asked if they think new CO2-based tax bands should be similar to those used for cars, or if a greater number of bands should be introduced.

Under a draft system based on that for cars, there would be savings for vans emitting up to 190g/km of CO2, while under a system with more bands there could be savings for vans emitting up to 220g/km, although an entirely different system could still be proposed.  

The government is not currently planning to take NOx emissions into account, saying it would be difficult to introduce a banded system based on these.

The consultation also asks for initial views on where there could be CO2-based reforms to the van benefit charge and van fuel benefit charge, although the government says if there is a demand for these to be reformed then a full separate consultation will take place.

Exchequer secretary to the treasury, Robert Jenrick, said: “We want to help ‘white van man’ go green. We appreciate that buying a new van is a major investment for small businessmen and women and want to help make environmentally friendly choices more affordable.”

Environment secretary Michael Gove said: “Air pollution remains a significant threat to public health and everyone must play their part tackling its causes.

“We will shortly build on our £3.5 billion plan to tackle roadside emissions, publishing a comprehensive Clean Air Strategy setting out a wide range of actions to reduce pollution from all sources.

“Businesses have a crucial role in this. That’s why today we are setting out plans to make low emission vans more affordable.”

The consultation will run until 20 July, and the government says it will consider the responses before making decisions on any changes at this year’s Budget, due to take place in the autumn.