Vehicle Excise Duty

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Vehicle Excise Duty (VED) (also known as vehicle tax, car tax and road tax), is a tax that is levied as an excise duty and 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 a valid MOT and valid insurance (unless the vehicle is less than three years old, in which case an MOT certificate is not required). A Statutory Off Road Notification (SORN) must be made for a registered vehicle that is not being used on the road, and which has been taxed since 31 January 1998. VED, which is collected and enforced by the Driver and Vehicle Licensing Agency (DVLA), raised GB£5.63 billion in 2009.[2]

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 (earmarked) 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]

Current regulations[edit]

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]

As from 1 October 2014, there is no requirement to display the paper Tax Disc, since the records will become fully computerised and logged via the vehicle registration.[7]

Cars[edit]

Charges as applicable from 1 April 2013.[8] For cars registered before 1 March 2001 the excise duty is based on engine size (£140 for vehicles with a capacity of less than 1549cc, £225 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 price structure was revised from 1 April 2013 to add an extra charge for the first year (the standard cost was not changed, and remains the same as for 2001 onwards). 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".[9] Charges as applicable from 1 April 2013 are:

Car emission band Standard Cost (£) Cost for first year (£) Notes
Band A (up to 100 g/km) 0 0
Band B (101-110 g/km) 20 0
Band C (111-120 g/km) 30 0
Band D (121-130 g/km) 105 0
Band E (131-140 g/km) 125 125
Band F (141- 150 g/km) 140 140
Band G (151 to 165 g/km) 175 175
Band H (166 to 175 g/km) 200 285
Band I (176 to 185 g/km) 220 335
Band J (186 to 200 g/km) 260 475
Band K (201 to 225 g/km) 280 620 also vehicles with >225 g/km registered before 23 March 2006.
Band L (226 to 255 g/km) 475 840
Band M (Over 255 g/km) 490 1065

Heavy goods vehicles[edit]

Taxation for use of Heavy goods vehicles (Large goods vehicles) on UK roads are based on the size, weight per axle. For full details refer to the source reference:[10]

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 weighing 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 weighing less than 38 tonnes
G £1,850 £1,350 Semi-trailer with three or more axles weighing less than 44 tonnes

Exempt vehicles[edit]

Various classes and uses of vehicle are provided with a tax disc without charge. These include: electrically propelled vehicles, vehicles older than 40 years (see below), 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.[11] 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.

Each year on 1 April, vehicles constructed more than 40 years before the start of that year become 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 in 1997 the cutoff date was frozen at 1 January 1973. The change to "pre-1973" was unpopular in the classic motoring community, and a number of classic car clubs campaigned for a change back to the previous system.[12] In 2006 there were 307,407 vehicles in this category:[13]

As of 1 April 2014, vehicles manufactured before 1 January 1974 became exempt from the VED (Finance Bill 2014, as set out in the 2013 Budget, 20 March 2013).

In the 2014 Budget, the government introduced a 40-year rolling exemption, with vehicles built before 1 January 1975 becoming exempt on 1 April 2015 and so on.[14]

Other vehicles[edit]

Motorcycle[edit]

Motorcycles are taxed on engine capacity rather than CO2 emissions.

Engine size (cc) 12 month rate 6 month rate
Not over 150 £17.00 Not available
151-400 £37.00 Not available
401-600 £57.00 £31.35
Over 600 £78.00 £42.90

Tricycles[edit]

Engine size (cc) 12 month rate 6 month rate
Not over 150 £17.00 Not available
Over 150 £78.00 £42.90

Enforcement[edit]

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.[15] It was estimated that 6.7% of motorcycles were not taxed in 2007. Since then better systems have reduced the loss to an estimated £33.9 million in 2009/2010.[16]

Automatic number plate recognition (ANPR) systems are being used to identify untaxed, uninsured vehicles and stolen cars.[17][18]

Rates since April 2005[edit]

All rates are in pounds sterling.

2005–06[19] 2006–07[19] 2007–08[20] 2008–09[21] 2009–10[22] 2010–11[22] 2011-12[23] 2012-13[23] 2013-14[23]
Petrol Diesel Petrol/Diesel Alt. Fuel Petrol/Diesel Alt. Fuel
Engine size of vehicles registered before 1 March 2001
<=1549cc 110 110 110 115 120 125 125 130 135 135 140 140
>1549cc 170 175 175 180 185 190 205 215 220 220 225 225
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 0 0 0 0 0
Band B (101–110g/km) 75 40 50 35 35 35 20 20 20 10 20 10
Band C (111–120g/km) 75 40 50 35 35 35 30 30 30 20 30 20
Band D (121–130g/km) 105 100 110 115 120 120 90 95 100 90 105 95
Band E (131–140g/km) 105 100 110 115 120 120 110 115 120 110 125 115
Band F (141–150g/km) 100 100 110 115 120 125 125 130 135 125 140 130
Band G (151–165g/km) 125 125 135 140 145 150 155 165 170 160 175 165
Band H (166–175g/km) 150 150 160 165 170 175 180 190 195 185 200 190
Band I (176–185g/km) 150 150 160 165 170 175 200 210 215 205 220 210
Band J (186–200g/km) 165 190 195 205 210 215 235 245 250 240 260 250
Band K∞ (201–225g/km) 165 190 195 205 210 215 245 260 270 260 280 270
Band L (226–255g/km) 165 210 215 300 400 405 425 445 460 450 475 465
Band M (over 255g/km) 165 210 215 300 400 405 435 460 495 465 490 480

∞Band K includes cars that have a CO2 figure over 225g/km but were registered before 23 March 2006.

The term "road tax" in common use[edit]

The term "road tax", which appears in the Oxford English Dictionary, is commonly used when referring to "Vehicle Excise Duty".[24] Despite its common usage though, this use is controversial, particularly among cycling activists. Such activists argue that, because many motorists wrongly believe that the proceeds from VED are used to fund the roads and even that the roads are funded solely from this tax, that technically there is no such thing as road tax. Peter Walker, a journalist at The Guardian gives this opinion of it "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".[25] In an opinion piece on the BBC Magazine website, a journalist explored this argument in 2013, suggesting how the term "road tax" is used by some drivers as a badge of entitlement to hog the road and drive badly, even intentionally hitting cyclists to argue their point.[26] The Cyclists' Touring Club explain that all tax payers, not just motorists, pay proportionately for the roads, and that cyclists impose minimal wear and tear on them.[27][dead link] 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".[28]

A small straw poll of 20 people by the BBC's Roger Harrabin in 2013 showed the term "road tax" is still in wide usage by the public, with 15 people using it in his poll and believing the tax paid exclusively for road upkeep.[26]

A single issue campaign, 'I pay road tax', was started by a cycling journalist in 2009 to challenge the use of the term 'road tax'.[29][30] The campaign has received support from Edmund King, President of The AA.[31]

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.[32] The term "road tax" is often incorrectly used when referring to "vehicle excise duty" in the UK media.[33][34]

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.[35]

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 advertisements 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."[36]

History[edit]

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 (£471.59 as of 2014),[37]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.[38][39]

In the budget of 1909, the then Chancellor of the Exchequer, David Lloyd George announced that the roads system would be self-financing,[40] and so from 1910 the proceeds of road vehicle excise duties were dedicated to fund the building and maintenance of the road system.[41]

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.[42] 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.[41]

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 he was Chancellor of the Exchequer.[citation needed] In 1926, by which time the direct use of taxes collected from motorists to fund the road network was already opposed by many in government, the Chancellor Winston Churchill is reported to have said in a memo: "Entertainments may be taxed; public houses may be taxed...and the yield devoted to the general revenue. But motorists are to be privileged for all time to have the tax on motors devoted to roads? This is an outrage upon...common sense."[26] 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.[40]

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).[43] 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. It was announced in the 2013 Budget that SORN declarations would become perpetual, thus removing the need for annual renewal after the initial declaration has been made.

In June 1999, a reduced VED band was introduced for cars with an engine capacity up to 1100cc.[44] 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).[45] 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 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 VED on all road users including cyclists, but there was a strong consensus against this.[46][47]

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.[48][49]

See also[edit]

References[edit]

  1. ^ "The road user and the law". Direct.gov.uk. "Most of the provisions apply on all roads throughout Great Britain, although there are some exceptions." 
  2. ^ United Kingdom National Accounts: The Blue Book (Report). Office for National Statistics. 2010.
  3. ^ "Vehicle Excise Duties". Parliament Briefing Paper. Retrieved 13 February 2013. 
  4. ^ Plowden, William (1971). The Motor Car And Politics 1896–1970. London: The Bodley Head. ISBN 0-370-00393-4. 
  5. ^ How to make a SORN (Statutory Off Road Notification) : Directgov - Motoring
  6. ^ "DVLA Vehicle Licensing Online - Common Questions". 
  7. ^ "Paper tax discs abolished". Gov.uk. Retrieved 22 January 2014. 
  8. ^ "Vehicle tax rate tables". Direct Gov. Retrieved 7 August 2013. 
  9. ^ "The cost of vehicle tax for cars, motorcycles, light goods vehicles and trade licences". Direct Gov. Retrieved 2 June 2011. 
  10. ^ "V149 Rates of vehicle tax". VOSA. 
  11. ^ "Vehicle Excise and Registration Act 1994: Schedule 2". The Crown. 
  12. ^ "Classic Car VED Exemption". Your Government. Retrieved 12 February 2011. 
  13. ^ May 2007b.138816.h&s=%22road+tax%22#g138816.q0 "Motor Vehicles: Excise Duties". TheyWorkForYou. Retrieved 30 March 2010. 
  14. ^ "Vehicle Excise Duty: 40 year rolling exemption for classic vehicles". HM Revenue and Customs. Retrieved 15 June 2014. 
  15. ^ "A million drivers are exploiting loophole in road tax payments". The Times (London). 
  16. ^ "Vehicle excise duty evasion: 2009". Department for Transport. 
  17. ^ John Lettice (15 September 2005). "Gatso 2: rollout of UK's '24x7 vehicle movement database' begins". The Register. Retrieved 14 October 2008. 
  18. ^ Chris Williams (15 September 2008). "Vehicle spy-cam data to be held for five years". The Register. Retrieved 15 October 2008. 
  19. ^ a b http://www.bytestart.co.uk/content/taxlegal/9_15/vehicle-excise-duty-rates-2006-7.shtml (2005–06 figures calculated from 2006-07 figures and changes)
  20. ^ "Tax Rates 2011-12 – Corporation Tax, Income Tax Bands & Allowances, National Insurance Rates, Dividend Tax Rates". Bytestart.co.uk. Retrieved 2013-08-22. 
  21. ^ "VED Rates (Vehicle Excise Duty) for 2011/12 tax year". Bytestart.co.uk. Retrieved 2013-08-22. 
  22. ^ a b "VED Rates (Vehicle Excise Duty) for 2011/12 tax year". Bytestart.co.uk. Retrieved 2013-08-22. 
  23. ^ a b c "Calculate vehicle tax rates - GOV.UK". Direct.gov.uk. 2013-05-30. Retrieved 2013-08-22. 
  24. ^ "Which? prints 'road tax' error; won't correct it". BikeBiz. "on Google analytics today, there are 1 million searches a month in the UK for the term 'car tax', 368,000 for the term 'road tax', 6,600 for the term 'vehicle excise duty' and 40,500 for 'VED'." 
  25. ^ Walker, Peter (18 March 2010). "Cyclists are not road tax dodgers". The Guardian (London). Retrieved 17 October 2010. "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" 
  26. ^ a b c Harrabin, Roger (15 August 2013). "The BBC explains "Road Tax"". BBC.co.uk. Retrieved 15 August 2013. 
  27. ^ "TEN COMMON QUESTIONS". "Q8: Cyclists don’t pay road tax, so you have no right to complain about the roads or drivers, or to take up road-space, do you? A: Actually, most adult cyclists do pay for the roads, even though they impose minimal wear and tear on them. There are no calls for pedestrians to start paying “road tax”, so why require it of cyclists?" 
  28. ^ "Frequently asked questions". Cambridge Cycle Campaign. "'Vehicle Excise Duty', its official name, goes directly into government coffers and does not 'pay for roads'. 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'.." 
  29. ^ "Twitter inspires "I Pay Road Tax" cycling jersey". Bike Radar. Retrieved 13 October 2010. 
  30. ^ Walker, Peter (18 March 2010). "Cyclists are not road tax dodgers". The Guardian (London). Retrieved 17 October 2010. 
  31. ^ "AA President applauds iPayRoadTax.com campaign". road.cc. Retrieved 13 October 2010. "AA President Edmund King has given his backing to the iPayRoadTax.com initiative, applauding the website as a great example of online campaigning ... King’s public support of the website, which seeks to dispel myths about ‘road tax,’ is testimony to the campaign’s success." 
  32. ^ "BBC backtracks on 'road tax' report". BikeBiz. Retrieved 13 October 2010. "Look East revisits a report on cycling which contained viewer comments about "cyclists not paying road tax ...BBC Look East ran a news story about a Cambridge cyclist being knocked from his bike by an inattentive driver but did not mention any police action being taken. Instead, BBC TV reporter Kim Riley read out viewer comments which complained that cyclists "do not pay road tax"." 
  33. ^ Brignall, Miles (17 April 2010). "Road tax to reflect carbon emissions". London: Guardian News and Media. Retrieved 19 October 2010. 
  34. ^ "Road tax increase 'will hit 9.4m'". BBC. 10 July 2008. Retrieved 19 October 2010. 
  35. ^ "Which? prints 'road tax' error; won't correct it". BikeBiz. "When creating online content, it is very important users are able to find it, so we are often guided by such data. There would be little point us creating the most comprehensive guide to UK Vehicle Excise Duty if few people are searching for that term. So while I do not propose we will stop using the terms 'car tax' and 'road tax' online, I will endeavour to make sure these are used with the appropriate reference to the full name of the tax.." 
  36. ^ "ASA: not so hot on truth in advertising". 
  37. ^ UK CPI inflation numbers based on data available from Gregory Clark (2013), "What Were the British Earnings and Prices Then? (New Series)" MeasuringWorth.
  38. ^ "The speech of the Chancellor of the Exchequer". The Times. 27 March 1888. 
  39. ^ "The Excise Duties (Local)". The Times. 27 March 1888. 
  40. ^ a b "Louise Butcher" (25 November 2008). Vehicle excise duty (VED). "House of Commons Library". 
  41. ^ a b "House of Commons Environmental Audit Committee" (22 July 2008). Vehicle Excise Duty as an environmental tax. "The Stationery Office Limited". 
  42. ^ C.D. Buchanan (1958). Mixed Blessing: The Motor in Britain. Leonard Hill. 
  43. ^ How to make a SORN (Statutory Off Road Notification) : Directgov - Motoring
  44. ^ : Budget Report 1999
  45. ^ "The Pre-Budget Report: Building a stronger, fairer Britain in an uncertain world" (Press release). UK HM Treasury. 27 November 2001. 
  46. ^ Dynesh Vijayaraghavan (2009). "Cycling Action Plan for Scotland: Analysis of Consultation Responses". Sustainable Transport Team, Scottish Government. p. 3. 
  47. ^ "A road tax for cyclists On your bike". The Scotsman (Edinburgh). 12 January 2010. 
  48. ^ Robert Winnett (13 March 2008). "Budget 2008: Motorists suffer tax hits in 'green' budget". The Daily Telegraph (London: Telegraph Media Group). Retrieved 14 May 2008. 
  49. ^ "Budget 2008 - motoring taxes". DirectGov. Retrieved 14 May 2008. 

External links[edit]