The way you tax your car has changed – here’s all you need to know about the changes in Vehicle Excise Duty (VED, known as road tax)
In October last year, the Government announced the end of the paper tax disc after 93 years meaning that you no longer need to display the disc in you windscreen. Instead number plate recognition will be used to check that you have paid you Vehicle Excise Duty (VED).
Here’s a quick guide to the changes in VED, what the changes mean for you, how you pay and also what happens when you come to sell your car.
Guide to road tax bands
There have been no changes in road tax bands, so the price you pay for your tax stays the same. However, there are changes in the new system as to what happens when you come to sell your car and how you can pay, so we’ve explained it all below.
VED changes explained
As of October 1st 2014 the colourful paper circles are no longer being issued and the requirement for motorists to display them in their cars ends. In the tax disc’s place comes a new system for paying your road tax, or Vehicle Excise Duty to use its proper name.
This overhaul of the road tax arrangements ends the tax disc’s 93-year reign and promises to make paying your car tax easier, while rendering the whole system cheaper to run.
What do the road tax changes mean for you?
The new car tax system isn’t being phased in gradually, UK motorists now no longer need to display a road tax disc on their car windscreen.
Even if you have time left to run on your car tax, the little disc can be removed and binned.
The DVLA will send you a reminder when your road tax is up for renewal in the time-honoured fashion, you can then pay your road tax online, over the phone or at the Post Office.
The road tax price bands remain the same, as do the existing options of paying for 12 or 6 months tax upfront but from November 1st there will be the option of paying your car tax monthly.
This new monthly option arrives in tandem with the facility to pay your road tax by Direct Debit.
Drivers paying in monthly instalments from their bank accounts will be subject to a 5% surcharge on top of the road tax price itself. That’s less than the 10% that’s added when you pay for six months tax, an option currently used by 23% of motorists. Only the one-off annual payment comes with no extra charges.
The key advantage of paying your car tax by Direct Debit is that the DVLA will continue taking the payments until you tell them to stop. It means that you’ll no longer need to remember to renew your car tax.
What happens to your road tax when you sell your car?
Under the new car tax system, any remaining road tax will not transfer to the new owner with the vehicle. Instead, the seller can get a road tax refund on any tax remaining on the vehicle, while the buyer has to pay to re-tax the car.
The tax refund on a sold car will be sent automatically when the DVLA receives notification that the car has been sold, scrapped, exported or taken off the road with a Statutory Off Road Notification (SORN).
Is there a catch to the new Vehicle Excise Duty regime?
So far, so good for the new road tax system but as often seems to be the case, there is a catch.
The problem that’s getting motorists riled centres around the refund you get on outstanding road tax when you sell your car. When ownership of a vehicle is transferred the previous owner gets a refund on any outstanding road tax but that refund is calculated from the beginning of the next month. The new owner, on the other hand, has to tax the car anew and their bill is calculated from the beginning of the current month.
What this means is that the Government effectively collects two lots of tax on the car for the month where ownership is transferred, one from the new owner who pays for that month and one from the previous owner who doesn’t get the tax for that month included in their refund. It’s sneaky stuff and should give a useful boost to the exchequer, but at the expense of motorists.
What the new system brings is an estimated saving to the tax payer of £10million per year.
The tax disc has had a good innings. More than 1.7 billion of them have been issued since 1921 and in 2013 a total of 42.2million were issued by the DVLA. You can’t stop the relentless march of technology though and the new system promises real improvements in the UK road tax system that should benefit motorists and save money.