A brief history of road tax and how to keep your car legal from October 1
The tax disc, Vehicle Excise Duty or VED is one of the most iconic – yet unloved – aspects of British motoring. Since 1921, the small circle of paper sitting in the bottom left hand corner of the windscreen has reassured passers-by and policemen that a vehicle’s owner had paid his or her fair share towards to construction and upkeep of the British road network. While many people still refer to the tax disc, road tax was abolished in 1937 and replaced by Vehicle Excise Duty .
VED is a tax on cars, not roads, and it goes straight into the general Treasury fund to be used for whatever the Government thinks is most important.
Sounds expensive – how much does that cost?
For cars registered before 1 March 2001, the rate of vehicle tax depends on its engine size. The rate for cars registered on or after 1 March 2001 depends on CO2 emissions and fuel type.
The Government’s desire to use taxation as a way to drive “dirty” cars off the road means that the price you pay for a tax disc is now based on a sliding scale of C02 Emissions .It’s free to “tax” a car producing less than 100 grams of C02 per kilometre, including all-electric vehicles such as the Nissan Leaf and low-emitting models including the new version of the Toyota Aygo. However, it costs £500 per year to tax a vehicle emitting over 255g/km, such as the Bentley Continental GT.
From 1st October 1, 2014, you’ll still need to tax your vehicle but you won’t get a tax disc. The Government says that delivering more services digitally will help it cut costs. Switching to digital tax discs will cost £8m to set up but will save £2m a year in administrative costs within three years.
To drive or keep a vehicle on the road you will still need to get vehicle tax and DVLA will still send you a renewal reminder when your vehicle tax is due to expire. This applies to all types of vehicles including those that are exempt from payment of vehicle tax.
From 1 October, when you buy a vehicle, the vehicle tax will no longer be transferred with the vehicle. You will need to get new vehicle tax before you can use the vehicle. Sellers have a duty to inform the DVLA of a change of ownership and face a fine of up to £1,000 if they fail to do so.
You can tax the vehicle using the New Keeper Supplement (V5C/2) part of the vehicle registration certificate (V5C) online or by phone - 24 hours a day, 7 days a week.
Alternatively, you can do it at a Post Office.
Is there anything else I need to know?
If you sell a vehicle after 1 October and you have notified DVLA, you will automatically get a refund for any full calendar months left on the vehicle tax. You will no longer need to make a separate application for a refund of vehicle tax. DVLA will automatically issue a refund when a notification is received from the person named on the DVLA vehicle register that the vehicle has been sold or transferred, scrapped, or removed from the road.
One of the biggest changes will be the ability to pay by Direct Debit
From 1 October 2014 (5 October if setting up at a Post Office), Direct Debit will be offered as an additional way to pay for vehicle tax. This will be available for customers who need to tax their vehicle from 1 November 2014.
The new Direct Debit scheme will allow motorists to pay their VED either monthly, bi-annually or annually and enjoy the administrative convenience of having their licence renewed automatically.
At present, paying VED bi-annually attracts a surcharge of 10 per cent. Biannual and monthly payments made by Direct Debit will attract a lower 5 per cent surcharge.
The DVLA estimates that the scheme will cost £8m to set up but will save the Government £2m in annual administrative costs from 2017.
Provided an MOT remains valid, the payments will continue automatically until you tell DVLA to stop taking them or you cancel the Direct Debit with your bank. Valid insurance should also be in place for vehicles registered in Northern Ireland.
The Direct Debit will be cancelled and payments automatically stopped when you tell DVLA that you no longer have the vehicle, or the vehicle has been taken off the road and a Statutory Off Road Notification has been made.
Will everybody be able to pay by Direct Debit?
Not everybody. The scheme will not be available to first registration vehicles, fleet schemes
Checking the tax status of a vehicle
You can check the tax status of any vehicle online . This can also be used for rental vehicles.
The DVLA has produced this helpful video outlining changes to vehicle taxation:
A personal view: “No-one likes having to pay their car tax, particularly as there’s no guarantee that the money you spend on that little circular disc of paper will be used for road improvements.
“However, regit supports anything that makes motoring easier. This move is likely to simplify the process of car taxation while removing unnecessary administrative costs from the process of tax collection.
“I really like the new option to pay by Direct Debit, which should help to smooth the annual cost of a vehicle excise into a more manageable monthly expense. It’s also great news that the Direct Debit option will attract a 5% premium rather than the 10% premium currently charged when people opt to renew their car tax twice a year rather than annually. That said, it would be even better if the Direct Debit option was exactly the same price as cash option and I can see no good reason why that shouldn’t be the case.”