Vehicle Excise Duty

Vehicle Excise Duty (VED, also commonly known as road tax) is an annual vehicle tax in the United Kingdom which should be paid for most types of motor vehicle which are to be used (or parked) on the public road; a vehicle licence should be displayed on the vehicle. VED is an excise duty which is collected and enforced by the Driver and Vehicle Licensing Agency (DVLA). Excise duty on road vehicles was first introduced in the 1888 budget and a new excise duty specifically for motor vehicles was introduced in 1920 which was paid into the road fund and was hypothecated for road construction. Since 1937 the money has gone into central government revenues and since then has not contributed directly to road building or maintenance.

History

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 (£ as of 2024),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.

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

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. 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.

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 taxes were paid directly into the Exchequer. The Road Fund itself, funded by government grants wasn't abolished until 1955.

Since 1998, owners of registered vehicles not using the public roads have been required to submit an annual Statutory Off-Road Notification (SORN). 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, cheaper car tax was introduced for cars with an engine capacity up to 1100cc. 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). 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 change is that HGVs from the UK and the continent pay exactly the same to use British roads (removing the ability of foreign vehicles to pay no UK tax). However, it is also expected that the tax will 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, graduated vehicle excise duty (GRAD VED) was introduced as an incentive to purchase vehicles with low emission levels.

In June 2005 the government announced plans to adopt a similar road user charging scheme for other road vehicles, which would work by tracing the movement of all 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)."

From April 2009 there will be a reclassification to the CO₂ bandings with the highest paying £455 per year and the lowest £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. Pre 1 March 2001 vehicles 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.

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.

Historical charges

Charges in £

	2005-06	2006-07		2007-08	2008-09	2009-10	2010-11
		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
CO2 emissions of 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 to 165g/km)	125	125	135	140	145	150	155
Band H (166 to 175g/km)	150	150	160	165	170	175	180
Band I (176 to 185g/km)	150	150	160	165	170	175	200
Band J (186 to 200g/km)	165	190	195	205	210	215	235
Band K (201 to 225g/km)	165	190	195	205	210	215	245
Band L (226 to 255g/km)	165	210	215	300	400	405	425
Band M (Over 255g/km)	165	210	215	300	400	405	435

Current regulations

All vehicle used or kept on the public road must have a valid tax disk and are required to display the issued non-transferable vehicle licence ("tax disc") on the vehicle. Owners of registered vehicles who do not wish to use or store a vehicle on the highway are required to submit an annual Statutory Off-Road Notification (SORN). 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.

The police have also been granted devolved powers to tow or clamp any vehicles a police officer or PCSO sees, that is unlicensed on a public road.

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).

Charges

• Cars registered before 1 March 2001 are charged according to engine capacity. In the 2008–2009 tax year this was £120 for cars with a capacity not over 1549cc and £185 for those over 1549cc. This was increased from 1 May 2009 to £125 for those cars not over 1549cc and £190 for those cars over 1549cc.
• Cars registered on or after 1 March 2001 are charged according to their level of carbon dioxide (CO₂) emission. For 2008–2009 this was up to £400, with the least emitting vehicles paying no excise duty at all. From 1 May 2009 petrol and diesel cars could pay up to £405.
• The highest rates of Vehicle Excise Duty ("Band G") only apply to vehicles manufactured after 23 March 2006 - the maximum VED for vehicles manufactured before that date is £205 for petrol and diesel powered vehicles. This increased to £215 from 1 May 2009.

Rates for all other vehicles vary from £15 for motorcycles with an engine capacity not over 150cc, up to a maximum of £1,850 for the largest heavy goods vehicles (HGVs). (Special rates apply to HGVs not used commercially.) A few special-purpose vehicles such as ambulances are exempt.

Exempt vehicles

Various classes and uses of vehicle are provided with a tax disk without charge.

Vehicles constructed before 1 January 1973 are eligible for a free vehicle licence under "classic car" 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. In 2006 there were 307,407 vehicles in this category:

Other exempt vehicle (broadly in descending order of total number) include:

• Vehicles registered to disabled people (1.12 million vehicles).
• Emergency vehicles (includes police cars, fire-engines, and ambulances and other health-service vehicles). (450,000 vehicles)
• Vehicle registered to ex-soldiers who are in receipt of war pensioners’ mobility supplement (18,340 vehicles).
• Band A cars (306 vehicles in 2006, but rising fast).
• Ministerial cars.
• Vehicles operated by the Government Car and Despatch Agency.
• Cars imported by American soldiers stationed in Britain.
• Road construction vehicles.
• Vehicles owned by the crown for the use of Queen Elizabeth II and other members of the royal family.

Enforcement

See also: Traffic enforcement camera

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

The term 'road tax'

Since at least 1888 road and vehicle taxes have been charged as excise duties. But although Vehicle Excise Duty has never been officially known as "road tax", it is the most widely used term for money paid to the Exchequer for driving a vehicle on UK roads. Road tax also has an entry in the Oxford English Dictionary. Which?, the British consumer magazine, defended its continued use of the term in April 2010 on the basis that "road tax" was more commonly used than Vehicle Excise Duty or VED, the official technical terms.

But cycling organisations have objected to the use of "road tax" on the basis that if confers on motorists more rights to the road because 'they pay road tax'. In November 2009, the 'I pay road tax' campaign launched to challenge this misconception.

In the 1920s the Road Fund was created by the British government to receive all revenues from VED. But it was widely opposed Winston Churchill who said: "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". From 1937 the duty collected from VED was no longer hypothecated to the Road Fund.

See also

• British car number plates and vehicle registration plate
• Congestion charge
• Vignette (road tax)
• Velology – the study and collection of tax discs

External links

• Current UK VED rates