Vehicle Excise Duty (VED) (also commonly known as vehicle tax, car tax and road tax) is a vehicle road use tax levied as an excise duty which must be paid for most types of vehicle which are to be used (or parked) on the public roads in the United Kingdom.[1] Vehicles used on public roads should display a current vehicle licence (tax disc) as proof of payment which will not be issued without prior proof that the vehicle has valid MOT and insurance. A Statutory Off Road Notification (SORN) must be made for a registered vehicle that is not being used on the road, and which have been taxed since 31 January 1998.
VED, which raised GB£5.63 billion in 2009,[2] is collected and enforced by the Driver and Vehicle Licensing Agency (DVLA). Vehicle tax was introduced in the 1888 budget and the current system of excise duty applying specifically to motor vehicles was introduced in 1920. This excise duty was ring-fenced for road construction and was paid directly into a special Road Fund from 1920 until 1937 after which it was treated as general taxation.[3] Even during this period the majority of the cost of road building and improvement came from general and local taxation due to the tax being too low for the upkeep of the roads.[4]
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Most motor vehicles used or kept on the public road are required to display a non-transferable vehicle licence ("tax disc"). The licence is issued upon payment of the appropriate VED amount (which may be zero). Owners of registered vehicles which have been licensed since 31 January 1998 and who do not now wish to use or store a vehicle on the highway are not required to pay VED, but are required to submit an annual Statutory Off-Road Notification (SORN).[5] Failure to submit a SORN is punishable in the same manner as failure to pay duty and display a tax disc when using the vehicle on public roads.
If you have paid for vehicle tax by phone or online before the current disc runs out, then you can legally drive or keep your vehicle on the road whilst displaying the tax disc that has run out, for up to 5 working days (giving time for your new tax disc to arrive by first class post).[6]
Charges as applicable from 1 April 2011. For cars registered before 1 March 2001 the excise duty is based on engine size (£130 for vehicles with a capacity of less than 1549cc, £215 for vehicles with larger engines). For vehicles registered on or after 1 March 2001 charges are based on theoretical CO2 emission rates per kilometre. The 'first year rate' only applies in the year the vehicle was first registered and is said by the government to be designed to send "a stronger signal to the buyer about the environmental implications of their car purchase".[7] Charges as applicable from 1 April 2011 are:
| Car emission band | Cost (£) | Cost for first year (£) | Notes |
|---|---|---|---|
| Band A (up to 100g/km) | 0 | 0 | |
| Band B (101-110g/km) | 20 | 0 | |
| Band C (111-120g/km) | 30 | 0 | |
| Band D (121-130g/km) | 95 | 0 | |
| Band E (131-140g/km) | 115 | 115 | |
| Band F (141- 150g/km) | 130 | 130 | |
| Band G (151 to 165g/km) | 165 | 165 | |
| Band H (166 to 175g/km) | 190 | 265 | |
| Band I (176 to 185g/km) | 210 | 315 | |
| Band J (186 to 200g/km) | 245 | 445 | |
| Band K (201 to 225g/km) | 260 | 580 | also vehicles with >225g/km registered before 23 March 2006. |
| Band L (226 to 255g/km) | 445 | 790 | |
| Band M (Over 255g/km) | 460 | 1000 |
Taxation for use of Heavy good vehicles (Large goods vehicles) on UK roads are based on the size, weight per axle. For full details refer to the source reference:[8]
| HGV tax band | Standard | Reduced pollution | Example vehicle in this category |
|---|---|---|---|
| A | £165 | £160 | HGV weighing less than 7.5 tonnes |
| B | £200 | £160 | HGV weighing less than 15 tonnes |
| C | £450 | £210 | Three and four axle vehicles weighing less than 21 tonnes |
| D | £650 | £280 | Four axle vehicles weighting less than 27 tonnes |
| E | £1,200 | £700 | Semi-trailer with two or more axles weighing less than 34 tonnes |
| F | £1,500 | £1,000 | Semi-trailer with two or more axles weighting less than 38 tonnes |
| G | £1,850 | £1,350 | Semi-trailer with three or more axles weighting less than 44 tonnes |
Various classes and uses of vehicle are provided with a tax disk without charge. These include: electrically propelled vehicles, vehicles constructed before 1973, trams, vehicles which cannot convey people, police vehicles, fire engines, ambulances and health service vehicles, mine rescue vehicles, lifeboat vehicles, certain road construction and maintenance vehicles, vehicles for disabled people, certain agricultural and land maintenance vehicles, road gritters and snow ploughs, vehicles undergoing statutory tests, vehicles imported by members of foreign armed forces, and crown vehicles.[9]. It should be noted that although Police vehicles are in fact crown vehicles and therefore exempt from the requirement for a tax disc, they generally display them regardless to suppress complaints from members of the public who might be stopped for failure to display a valid tax disc on their own vehicle, and thus make accusations of double-standards, no matter the lack of merit.
Vehicles constructed before 1 January 1973 are eligible for a free vehicle licence under "historic vehicle" legislation. This is due to the age of the vehicle and a presumption of limited mileage. Initially this was a rolling exemption applied to any vehicles over 25 years old, however the cutoff date was frozen in 1997. The change to "pre-1973" was unpopular in the classic motoring press, and a number of classic car clubs are campaigning for a change back to the previous system.[10] In 2006 there were 307,407 vehicles in this category:[11]
£16 for motorcycles with an engine capacity not over 150cc.
In 2008 it was reported that flaws in DVLA enforcement practices have meant that more than a million late paying drivers per year have evaded detection which lost £214 million in VED revenue during 2006.[12] It was estimated that 6.7% of motorcycles were not taxed in 2007. Since then better systems have reduced the loss to an estimated £34 million in 2009/2010.[13]
Automatic number plate recognition (ANPR) systems are being used to identify untaxed, uninsured vehicles and stolen cars.[14][15]
All rates are in pounds sterling.
| 2005–06[16] | 2006–07[16] | 2007–08[17] | 2008–09[18] | 2009–10[19] | 2010–11[19] | ||
|---|---|---|---|---|---|---|---|
| Petrol | Diesel | ||||||
| Engine size of vehicles registered before 1 March 2001 | |||||||
| <=1549cc | 110 | 110 | 110 | 115 | 120 | 125 | 125 |
| >1549cc | 170 | 175 | 175 | 180 | 185 | 190 | 205 |
| Based on CO2 emission ratings for vehicles registered on or after 1 March 2001 | |||||||
| Band A (up to 100g/km) | 65 | 0 | 0 | 0 | 0 | 0 | 0 |
| Band B (101–110g/km) | 75 | 40 | 50 | 35 | 35 | 35 | 20 |
| Band C (111–120g/km) | 75 | 40 | 50 | 35 | 35 | 35 | 30 |
| Band D (121–130g/km) | 105 | 100 | 110 | 115 | 120 | 120 | 90 |
| Band E (131–140g/km) | 105 | 100 | 110 | 115 | 120 | 120 | 110 |
| Band F (141–150g/km) | 100 | 100 | 110 | 115 | 120 | 125 | 125 |
| Band G (151–165g/km) | 125 | 125 | 135 | 140 | 145 | 150 | 155 |
| Band H (166–175g/km) | 150 | 150 | 160 | 165 | 170 | 175 | 180 |
| Band I (176–185g/km) | 150 | 150 | 160 | 165 | 170 | 175 | 200 |
| Band J (186–200g/km) | 165 | 190 | 195 | 205 | 210 | 215 | 235 |
| Band K∞ (201–225g/km) | 165 | 190 | 195 | 205 | 210 | 215 | 245 |
| Band L (226–255g/km) | 165 | 210 | 215 | 300 | 400 | 405 | 425 |
| Band M (over 255g/km) | 165 | 210 | 215 | 300 | 400 | 405 | 435 |
∞Band K includes cars that have a CO2 figure over 225g/km but were registered before 23 March 2006.
The terms "car tax", "road tax" and "vehicle tax" are commonly used when referring to "Vehicle Excise Duty".[20] Road tax has an entry in the Oxford English Dictionary.
Some people, in particular cyclists, cycling organisations and cycling publications object to use of the term 'road tax' since roads are paid for from general taxation, arguing that there is no such thing as a "road tax". Peter Walker, a journalist at The Guardian explains "I've always felt the road tax argument supports a more general feeling of entitlement among too many drivers. Those who trot it out often seem to genuinely treat cyclists like we're interlopers who should be pushed aside".[21] The Cyclists' Touring Club argue 'most adult cyclists do pay for the roads, even though they impose minimal wear and tear on them'.[22] The Cambridge Cycle Campaign suggested that "Arguing that cyclists therefore have less right to use the roads is like arguing that smokers should take precedence for medical treatment, because non-smokers don't buy cigarettes and therefore 'don't pay hospital tax".[23]
The direct use of taxes collected from motorists to fund the road network was opposed by Winston Churchill, who predicted "It will be only a step from this for them to claim in a few years the moral ownership of the roads their contributions have created".[4]
A single issue campaign, 'I pay road tax' started by a cycling journalist in 2009 to challenge the use of the term 'road tax'.[24][25] The campaign has received support from Edmund King, President of The AA.[26]
In a BBC report on Look East in May 2010 about a cyclist who was knocked off his bike by a car the presenter read out a series of emails from viewers expressing the view that 'cyclists should pay road tax' if they wish to use the roads. After receiving a 'huge number' of complaints from viewers following publicity created by iPayRoadTax, the BBC broadcast a second piece which clarified the fact that roads are paid for out of general taxation [27]. The term "road tax" is often used when referring to "vehicle excise duty" in the UK media. [28][29].
When challenged by iPayRoadTax, Which?, the British consumer magazine, defended its continued use of the term on the basis that "road tax" was more commonly used than Vehicle Excise Duty. A spokesman also said that while they would not stop using the terms 'car tax' and 'road tax' online that they would endeavour to also make appropriate reference to the full name of the tax.[30]
One organisation that appears to be content with the current use of 'road tax' as the vernacular for VED is the Advertising Standards Authority. Complaints that advertisments using the term are incorrect are rejected with what appears to be a templated letter stating "although we acknowledge that the correct term is 'Vehicle Excise Duty', more commonly used phrases such as 'Road Tax' are often used by advertisers to convey a message in a way that will be understood by the widest audience." [31]
Following the 1888 budget, two new vehicle duties were introduced — the locomotive duty and the trade cart duty (a general wheel-tax also announced in the same budget was abandoned). The locomotive duty was levied at £5 (£413 as of 2012),[32]for each locomotive used on the public roads and the trade cart duty was introduced for all trade vehicles (including those which were mechanically powered) not subject to the existing carriage duty, with the exception of those used in agriculture and those weighing less than 10 cwt-imperial, at the rate of 5s. (£0.25) per wheel.[33][34]
In the budget of 1909, the then Chancellor of the Exchequer, David Lloyd George announced that the roads system would be self financing,[35] and so from 1910 the proceeds of road vehicle excise duties were dedicated to fund the building and maintenance of the road system.[36]
The Roads Act 1920 required councils to 'register all new vehicles and to allocate a separate number to each vehicle' and 'make provision for the collection and application of the excise duties on mechanically-propelled vehicles and on carriages'. The Finance Act 1920 introduced a 'Duty on licences for mechanically propelled vehicles' which was to be hypothecated and paid into a newly established Road Fund.[37] Excise duties specifically for mechanically propelled vehicles were first imposed in 1921, along with the requirement to display a vehicle licence (tax disc) on the vehicle.[36]
The accumulated Road Fund was never fully spent on roads (most of it was spent on resurfacing, not the building of new roads), and became notorious for being used for other government purposes, a practice introduced by Winston Churchill, when Chancellor of the Exchequer. Hypothecation came to an end in 1937 under the 1936 Finance Act, and the proceeds of the vehicle road taxes were paid directly into the Exchequer. The Road Fund itself, then funded by government grants, wasn't abolished until 1955.[35]
Since 1998, keepers of registered vehicles which had been licensed since 1998, but which were not currently using the public roads, have been required to submit an annual Statutory Off-Road Notification (SORN).[38] Failure to submit a SORN is punishable in the same manner as failure to pay duty and display a tax disc when using the vehicle on public roads.
In June 1999, a reduced car road tax band was introduced for cars with an engine capacity up to 1100cc.[39] The cost of 12 months tax for cars up to 1100cc was £100, and for those above 1100cc was £155.
In the pre-budget report of 27 November 2001 the Government announced that VED for HGVs could be replaced, by a new tax based on distance travelled, the Lorry Road-User Charge (LRUC).[40] At the same time, the rate of fuel duty would be cut for such vehicles. As at the start of 2007 this scheme is still at a proposal stage and no indicated start date has been given. The primary aim of the proposed change was that HGVs from the UK and the continent would pay exactly the same to use British roads (removing the ability of foreign vehicles to pay no UK tax). However, it was also expected that the tax would be used to influence routes taken (charging lower rates to use motorways), reduce congestion (by varying the charge with time of day), and encourage low emission vehicles.
In tax year 2002–2003, it is estimated that evasion of the tax equated to a loss to the Exchequer of £206 million. In an attempt to reduce this, from 2004 an automatic £80 penalty (halved if paid within 28 days) is issued by the DVLA computer for failure to pay the tax within one month of the expiry of the previous tax disc. A maximum fine of £1,000 applies for failure to pay the tax, though in practice fines are normally much lower.
In March 2005, a graduated vehicle excise duty system, with tax bands based on CO2 ratings, was introduced as an incentive to purchase vehicles with lower emission ratings.
In June 2005 the government announced plans to adopt a road user charging scheme for all road vehicles, which would work by tracing the movement of vehicles using a telematics system. The idea raised immediate objections on civil and human rights grounds that it would amount to mass surveillance. An online petition protesting this was started and reached over 1.8 million signatures by the closing date of 20 February 2007.
Since 1 September 2008, the DVLA have stated: "If you pay your vehicle tax by phone or online before the current disc runs out, then you can legally drive or keep your vehicle on the road whilst displaying the tax disc that has run out, for up to 5 working days (Giving time for your new tax disc to arrive by first class post)."
In April 2009 there was a reclassification to the CO2 rating based bandings with the highest set at £455 per year and the lowest at £0, the bandings have also been backdated to cover vehicles registered on or after 1 March 2001, meaning that vehicles with the highest emissions registered after this date pay the most. Vehicles registered before 1 March 2001 will still continued to be charged according to engine size, above or below 1549cc.
In 2009 a consultation document from the Scottish Government raised the possibility of a road tax on all road users including cyclists, but there was a strong consensus against this.[41][42]
From 2010 a new first year rate is to be introduced - dubbed a showroom tax. This new tax was announced in the 2008 budget, and the level of tax payable will be based on the vehicle excise duty band, ranging from £0 for vehicles in the lower bands, up to £950 for vehicles in the highest band.[43][44]