Vehicle Excise Duty (VED; also known as "vehicle tax", "car tax", and more controversially as "
road tax
Road tax, known by various names around the world, is a tax which has to be paid on, or included with, a motorised vehicle to use it on a public road.
National implementations Australia
All states and territories require an annual vehicle registra ...
", and formerly as a "tax disc") is an annual tax that is levied as an
excise
file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...
duty
A duty (from "due" meaning "that which is owing"; fro, deu, did, past participle of ''devoir''; la, debere, debitum, whence "debt") is a commitment or expectation to perform some action in general or if certain circumstances arise. A duty may ...
and which must be paid for most types of powered
vehicle
A vehicle (from la, vehiculum) is a machine that transports people or cargo. Vehicles include wagons, bicycles, motor vehicles (motorcycles, cars, trucks, buses, mobility scooters for disabled people), railed vehicles (trains, trams), wa ...
s which are to be used (or parked) on
public road
A highway is any public or private road or other public way on land. It is used for major roads, but also includes other public roads and public tracks. In some areas of the United States, it is used as an equivalent term to controlled-access ...
s in the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
. Registered vehicles that are not being used or parked on public roads and which have been taxed since 31 January 1998, must be covered by a Statutory Off Road Notification (SORN) to avoid VED. In 2016, VED generated approximately £6
billion
Billion is a word for a large number, and it has two distinct definitions:
*1,000,000,000, i.e. one thousand million, or (ten to the ninth power), as defined on the short scale. This is its only current meaning in English.
* 1,000,000,000,000, i. ...
for the
Exchequer
In the civil service of the United Kingdom, His Majesty’s Exchequer, or just the Exchequer, is the accounting process of central government and the government's '' current account'' (i.e., money held from taxation and other government revenu ...
.
A vehicle tax was first introduced in Britain in 1888.
In 1920, an excise duty was introduced that was specifically applied to motor vehicles; initially it was
hypothecated
Hypothec (; german: Hypothek, french: hypothèque, pl, hipoteka, from Latin, Lat. ''hypotheca'', from Ancient Greek language, Gk. : hypothēkē), sometimes tacit hypothec, is a term used in civil law systems (e.g. law of entire Continental Europ ...
(ring-fenced or earmarked) for road construction and paid directly into a special
Road Fund. After 1937, this reservation of vehicle revenue for roads was ended, and instead the revenue was paid into the
Consolidated Fund
In many states with political systems derived from the Westminster system, a consolidated fund or consolidated revenue fund is the main bank account of the government. General taxation is taxation paid into the consolidated fund (as opposed ...
– the general pot of money held by government. Since then, maintenance of the UK road network has been funded out of general taxation, of which VED is a part.
Current regulations
VED across the United Kingdom is collected and enforced by the
Driver and Vehicle Licensing Agency
The Driver and Vehicle Licensing Agency (DVLA; cy, Asiantaeth Trwyddedu Gyrwyr a Cherbydau) is the organisation of the UK government responsible for maintaining a database of drivers in Great Britain and a database of vehicles for the entire ...
(DVLA). Until 2014, VED in
Northern Ireland
Northern Ireland ( ga, Tuaisceart Éireann ; sco, label= Ulster-Scots, Norlin Airlann) is a part of the United Kingdom, situated in the north-east of the island of Ireland, that is variously described as a country, province or region. Nort ...
was collected by the
Driver and Vehicle Agency
The Driver and Vehicle Agency (DVA) ( ga, An Ghníomhaireacht Tiománaithe agus Feithiclí) is a government agency of the Department for Infrastructure in Northern Ireland. The agency is responsible for conducting vehicle testing, driver testi ...
there; responsibility has since been transferred to the DVLA.
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 public highway are not required to pay VED, but 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 when using the vehicle on public roads.
Until 1 October 2014 a
vehicle licence
A vehicle licence (also called a vehicle registration certificate in some jurisdictions) is issued by a motor registration authority in a jurisdiction in respect of a particular motor vehicle. A current licence is required for a motor vehicle to b ...
(tax disc) had to be displayed on a vehicle (usually adhered inside the windscreen on the nearside thus easily visible to officials patrolling roads on foot) as evidence of having paid the duty. Since that date, the circular paper discs have not been issued and there is no longer a requirement to display a disc as the records are now stored in a centralised database and accessible using the
vehicle registration plate
A vehicle registration plate, also known as a number plate (British English), license plate (American English), or licence plate ( Canadian English), is a metal or plastic plate attached to a motor vehicle or trailer for official identificati ...
details.
Cars
There are currently three payment schedules in effect, depending on whether the car was first registered before or after 1 April 2017, or before 1 March 2001.
Registered before 1 March 2001
For cars registered before 1 March 2001 the excise duty is based on engine size.
Registered before 1 April 2017
![UK_car_vehicle_excise_duty_2013](https://upload.wikimedia.org/wikipedia/commons/b/b4/UK_car_vehicle_excise_duty_2013.svg)
For vehicles registered between 1 March 2001 and 31 March 2017 charges are based on theoretical CO
2 emission rates per kilometre. The price structure was revised from 1 April 2013 to introduce an alternative charge for the first year (the standard cost was not changed, and remained 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".
Alternative fuel cars (TC59) all warrant a £10 discount from the below except zero rated. Charges as applicable from 1 April 2022:
Registered after 1 April 2017
The biggest changes are that hybrid vehicles will no longer be rated at £0 and that cars with a retail price of £40,000 and over will pay a supplement for the first five years of the standard rate (e.g. any subsequent renewal, even if the change of owner is within the first year).
In addition, all non-zero-emissions cars or motorhomes with a "list price" of over £40,000 pay an additional supplement for the first five years of the standard rate. As of 1 April 2022 this is charged at £355 in years 2–6 of ownership, including if ownership changes during this time.
The official government website details the following:
=Policy objective
=
The pre-2017 VED structure based on CO
2 bands was introduced in 2001 when average UK new car emissions ratings were 178 g CO
2/km. The Band A threshold of 100 gCO
2/km below which cars pay no VED was introduced in 2003 when average new car emissions ratings were 173 g CO
2/km. Since then, to meet EU emissions ratings targets average new car emissions ratings have fallen to 125 g CO
2/km. This means that an increasingly large number of ordinary cars fell into the zero- or lower-rated VED bands, creating a sustainability challenge and weakening the environmental signal in VED. This is set to continue as manufacturers meet further EU targets of 95 g CO
2/km set for 2020.
The reformed VED system retains and strengthens the CO
2-based First-Year-Rates to incentivise uptake of the very cleanest cars whilst moving to a flat Standard Rate in order to make the tax fairer, simpler and sustainable. To ensure those who can afford the most expensive cars make a fair contribution, a supplement of £310 (as of 2017) will be applied to the Standard Rate of cars with a list price (not including VED) over £40,000, for the first five years in which a Standard Rate is paid.
Other vehicle tax rates
Light goods vehicles (TC39)
Registered on or after 1 March 2001 and not over 3,500 kg revenue weight (also known as maximum or gross vehicle weight).
Euro 4 light goods vehicles (TC36)
Registered between 1 March 2003 and 31 December 2006, Euro 4 compliant and not over 3,500 kg revenue weight.
Euro 5 light goods vehicles (TC36)
Registered between 1 January 2009 and 31 December 2010, Euro 5 compliant and not over 3,500 kg revenue weight.
Motorcycle (with or without sidecar) (TC17)
Tricycles (not over 450kg unladen) (TC50)
Trade licences
Trade licences are available for between 6 and 12 months, depending on the month in which the application is made.
Heavy goods vehicles
Taxation for use of
heavy goods vehicles on UK roads are based on the size, weight per axle.
The HGV levy is suspended from 1 August 2020 to 31 July 2023 to support the haulage sector and aid pandemic recovery efforts.
Previous rates were:
Exempt vehicles
Various classes and uses of vehicle are exempt, including 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. Electrically propelled vehicles were exempt until 1995 (at a time when the most common electric vehicles were
milk float
A milk float is a vehicle specifically designed for the delivery of fresh milk. Today, milk floats are usually battery electric vehicles (BEV), but they were formerly horse-drawn floats. They were once common in many European countries, ...
s); today, they are not exempt, but are generally zero rated.
Each year on 1 April, vehicles constructed more than forty years before the start of that year become eligible for a free
vehicle licence
A vehicle licence (also called a vehicle registration certificate in some jurisdictions) is issued by a motor registration authority in a jurisdiction in respect of a particular motor vehicle. A current licence is required for a motor vehicle to b ...
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. In 2006 there were 307,407 vehicles in this category.
As of 1 April 2014, vehicles manufactured before 1 January 1974 became exempt from the VED (
Finance Act 2014
A Finance Act is the headline fiscal (budgetary) legislation enacted by the UK Parliament, containing multiple provisions as to taxes, duties, exemptions and reliefs at least once per year, and in particular setting out the principal tax rates f ...
, as set out in the 2013 Budget, 20 March 2013).
In the 2014 Budget, the government introduced a forty-year rolling exemption, with vehicles built before 1 January 1975 becoming exempt on 1 April 2015 and so on.
Enforcement
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. It was estimated that 6.7% of motorcycles were not taxed in 2007. Since then better systems reduced the loss to an estimated £33.9 million in 2009/2010.
Automatic number plate recognition
Automatic number-plate recognition (ANPR; see also #Other names, other names below) is a technology that uses optical character recognition on images to read vehicle registration plates to create vehicle location data. It can use existing close ...
(ANPR) systems are being used to identify untaxed, uninsured vehicles and stolen cars.
History
![Churchill and Chamberlain](https://upload.wikimedia.org/wikipedia/commons/2/25/Churchill_and_Chamberlain.jpg)
Following the 1888
budget
A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...
, 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 (equivalent to £ as of ), 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 5
s (
£0.25) per wheel.
The Road Fund
In the
budget of 1909, the then
Chancellor of the Exchequer
The chancellor of the Exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and head of His Majesty's Treasury. As one of the four Great Offices of State, the Chancellor is ...
,
David Lloyd George
David Lloyd George, 1st Earl Lloyd-George of Dwyfor, (17 January 1863 – 26 March 1945) was Prime Minister of the United Kingdom from 1916 to 1922. He was a Liberal Party politician from Wales, known for leading the United Kingdom during t ...
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.
Even during this period the majority of the cost of road building and improvement came from general and local taxation owing to the tax being too low for the upkeep of the roads.
The
Roads Act 1920
The Roads Act 1920 was an Act of the Parliament of the United Kingdom which established the Road Fund, and introduced tax discs.
Clauses
The Act:
*Required county councils to register all new vehicles and to allocate a separate number to each ...
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
Hypothec (; german: Hypothek, french: hypothèque, pl, hipoteka, from Latin, Lat. ''hypotheca'', from Ancient Greek language, Gk. : hypothēkē), sometimes tacit hypothec, is a term used in civil law systems (e.g. law of entire Continental Europ ...
'' – that is, the revenue would be exclusively dedicated to a particular expenditure, namely the newly established
Road Fund.
Excise duties
file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...
specifically for
mechanically propelled vehicles were first imposed in 1921, along with the requirement to display a
vehicle licence (tax disc) on the vehicle.
End of hypothecation
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
Sir Winston Leonard Spencer Churchill (30 November 187424 January 1965) was a British statesman, soldier, and writer who served as Prime Minister of the United Kingdom twice, from 1940 to 1945 Winston Churchill in the Second World War, dur ...
when he was Chancellor of the Exchequer. 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."
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, was not abolished until 1955.
1990s
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). Failure to submit a SORN is punishable in the same manner as failure to pay duty 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. The cost of 12 months tax for cars up to 1100cc was £100, and for those above 1100cc was £155.
Emissions ratings tax
During the 1990s, political arguments were put forward for the abolition of VED. Among the proposals was a suggestion that VED could be replaced by increased
fuel duty as an incentive for consumers to purchase vehicles with lower emission ratings. The proposal was politically unappealing, as it would increase costs for businesses and for people living in rural areas. Rather than abolish VED, the
Labour government under Tony Blair introduced a new system for calculating of VED that was linked explicitly with a vehicle's
carbon emission
Greenhouse gas emissions from human activities strengthen the greenhouse effect, contributing to climate change. Most is carbon dioxide from burning fossil fuels: coal, oil, and natural gas. The largest emitters include coal in China and larg ...
s ratings, as a means for
vehicle emissions control
Vehicle emissions control is the study of reducing the emissions produced by motor vehicles, especially internal combustion engines.
Types of emissions
Emissions of many air pollutants have been shown to have variety of negative effects on public ...
. Since then, VED was levied in a system of tax bands based on
CO2 ratings.
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 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
motorway
A controlled-access highway is a type of highway that has been designed for high-speed vehicular traffic, with all traffic flow—ingress and egress—regulated. Common English terms are freeway, motorway and expressway. Other similar terms i ...
s), reduce congestion (by varying the charge with time of day), and encourage low emissions ratings vehicles.
In
tax year
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
2002–2003, it is estimated that evasion of the tax equated to a loss to the
Exchequer
In the civil service of the United Kingdom, His Majesty’s Exchequer, or just the Exchequer, is the accounting process of central government and the government's '' current account'' (i.e., money held from taxation and other government revenu ...
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 expiry. A maximum fine of £1,000 applies for failure to pay the tax, though in practice fines are normally much lower.
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
Telematics is an interdisciplinary field encompassing telecommunications, vehicular technologies ( road transport, road safety, etc.), electrical engineering (sensors, instrumentation, wireless communications, etc.), and computer science (multimedi ...
system. The idea raised objections on
civil
Civil may refer to:
*Civic virtue, or civility
*Civil action, or lawsuit
* Civil affairs
*Civil and political rights
*Civil disobedience
*Civil engineering
*Civil (journalism), a platform for independent journalism
*Civilian, someone not a membe ...
and
human rights
Human rights are Morality, moral principles or Social norm, normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for ce ...
grounds that it would amount to
mass surveillance
Mass surveillance is the intricate surveillance of an entire or a substantial fraction of a population in order to monitor that group of citizens. The surveillance is often carried out by local and federal governments or governmental organizati ...
. An online petition protesting this was started and reached over 1.8 million signatures by the closing date of 20 February 2007.
In April 2009 there was a reclassification to the CO
2 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 ratings 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
Cycling, also, when on a two-wheeled bicycle, called bicycling or biking, is the use of Bicycle, cycles for transport, recreation, Physical exercise, exercise or sport. People engaged in cycling are referred to as "cyclists", "bicyclists", ...
, 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
A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...
, 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.
VED can be automatically be collected from a bank account by
Direct Debit A direct debit or direct withdrawal is a financial transaction in which one organisation withdraws funds from a payer's bank account., https://www.directdebit.co.uk/direct-debit-explained/what-is-direct-debit/ Formally, the organisation that calls f ...
however this cannot be applied to vehicles with a £0 VED, for these a paper reminder is sent to the registered keeper who then has to renew at a post office or online. 34,000 drivers were fined in 2017/18 for not renewing.
See also
*
Car costs
The car internal costs are all the costs consumers pay to own and operate a car. Normally these expenditures are divided by fixed or standing costs and variable or running costs. Fixed costs are those ones which do not depend on the distance tra ...
*
London congestion charge
The London congestion charge is a fee charged on most cars and motor vehicles being driven within the Congestion Charge Zone (CCZ) in Central London between 7:00 am and 6:00 pm Monday to Friday, and between 12:00 noon and 6:00 pm Saturday an ...
*
Motoring taxation in the United Kingdom
Motoring taxation in the United Kingdom consists primarily of vehicle excise duty (commonly known as VED, vehicle tax, car tax, and road tax), which is levied on vehicles registered in the UK, and hydrocarbon oil duty (normally referred to as f ...
*
Road Fund
*
Vehicle registration plates of the United Kingdom
Vehicle registration plates (commonly referred to as "number plates" in British English) are the alphanumeric plates used to display the ''registration mark'' of a vehicle, and have existed in the United Kingdom since 1904. It is compulsory fo ...
*
Velology – the study and collection of tax discs
*
Vignette (road tax)
Vignette is a form of road pricing imposed on vehicles, usually in addition to the compulsory road tax, based on a period of time the vehicle may use the road, instead of road tolls that are based on distance travelled. Vignettes are currently ...
References
External links
UK vehicle tax informationon
Directgov
Directgov was the British government's digital service for people in the United Kingdom, which from 2004 provided a single point of access to public sector information and services. The site's portal was replaced (along with the Business Link p ...
Apply onlineVED Calculator(for cars registered after April 2017)
{{DEFAULTSORT:Vehicle Excise Duty
Motoring taxation in the United Kingdom
Vehicle taxes
Transport policy in the United Kingdom
1888 introductions
Car costs