Love it or hate it, road tax is something which most of us need to pay for when we get behind the wheel. And that's true regardless of whether you're leasing, buying, or taking out PCP on a car. Like MOT, car insurance and servicing, it's one of those essential 'must haves' for driving here in the UK.
But what does road tax actually go towards?
We’ll be exploring that question in this post, whilst also keeping you up to speed with the fundamentals of road tax knowledge.
What is VED and Why Do We Have to Pay It?
Road tax, or Vehicle Excise Duty (VED), is an annual tax on vehicle usage. It must be paid for most types of powered vehicles which are used on public roads. Basically, it's a legal requirement, and the money it raises gets used for projects that are meant to benefit everyone.
Tax discs were introduced in 1921 and until 1974 auto taxes were controlled by local authorities. Then the Driver and Vehicle Licensing Centre (DVLC) was created with a Swansea office, later becoming the Driver and Vehicle Licensing Agency (DVLA), which is why you get your driving license from Wales.
Is It Vehicle Tax or Road Tax?
Technically, the correct term is vehicle tax (or to give it its official name, Vehicle Excise Duty) and not road tax. That’s because you don't pay the tax in order to be on the road. You pay it for the vehicle that you use. In fact, road tax hasn’t directly paid for roads since the 1930s. So it’s a personal tax and not a communal tax.
Despite that, 'vehicle tax' sounds too unfamiliar and the term ‘road tax’ has stuck with the popular imagination and continues to be used in everyday conversation, so we won’t be too harsh on you for continuing to use it. And just for convenience sake, we’ll stick with it for the duration of this post.
Where Does the Road Tax Money End Up?
For the 2022-23 period, the Office for Budget Responsibility estimates that road tax will raise £7.2 billion in revenue, so where does this vast amount of money go?
Maybe you think it ends up either exclusively with local councils or with the Department for Transport, but that's far from the truth. When road tax is paid, it goes to the central government fund of the Exchequer, just like other forms of tax such as council tax, corporation tax, and so forth. (And just in case you don't know, the Exchequer is a government department headed by the Chancellor of the Exchequer, which at the time of writing is Jeremy Hunt.)
Does it Pay For the Roads?
Kind of . . .
The money that goes into the Exchequer gets spent on a whole number of things which are meant to benefit everyone, ranging from teachers, the police service, hospitals, infrastructure, local projects and, yep, road work and maintenance.
Those are fairly broad terms which could include roadworks, the building of new roads and the widening of existing roads, as well as building tunnels to help make the lives of drivers that little bit easier. So if you’re stuck in a tailback on the motorway thanks to roadworks, just tell yourself that this is something being done for the greater good in order to benefit you, and your tax money probably helped make it happen.
All in all, it's hard to say exactly what each penny of your road tax goes towards and how much of it actually gets spent on the roads, but chances are that at least some of it does. It's just not as simple as an 'A to B' transfer of money.
Who Gets the Money for the Roads, Then?
Responsibility for the roads falls under the Department of Transport, who take the money allocated to them by the Exchequer and distribute it to the Highways Agency (who maintain the strategic road network) and to Local Authorities who maintain everything except motorways and trunk roads (the more significant 'A' roads).
Interestingly, none of the revenue collected from road tax and distributed by the Exchequer is used to repair potholes (maybe Britain's number one road plight, besides traffic incidents), as this is specifically the responsibility of local council budgets.
Get the finger out, local councils!
UK Car Tax Bands Explained
The rate you pay depends on what tax band your vehicle falls into, and that is determined by when your vehicle was first registered. Depending on when your car was first registered, there's different rates of tax. The bands are as follows:
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Car first registered on or after 1st April 2025
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Car first registered between 1st April 2017 and 31st March 2025
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Car first registered between 1st March 2001 and 31st March 2017
Within these bands, the rate you pay can depend on the vehicle's CO2 emissions (lower emissions means less tax), how much it costed when new, and the year in which it was produced. The UK government has certain targets it needs to meet regarding climate change and emissions, which is why CO2 is a big factor.
Tax bands for cars registered after April 2017
Fuel type and the car’s new list price (if more than £40,000) determine the tax rate paid here. This can range from £0 to as much as £2,365 for the most pollutant cars.
Tax bands for cars registered after March 2001 and before April 2017
CO2 emissions and fuel type determine this level of road tax.
Although cars bought between March 2001 and 2017 will continue paying a tax rate based on the CO2 emissions, this is set to change in March 2025, moving from Tax Band A (£10 per year) to Band B (£20 per year).
Tax bands for cars registered before 1 March 2001
In this case, engine capacity is the determining factor. Engine capacities up to 1549cc pay one rate, and above that a higher rate applies.
Vehicles Exempt from Car Tax
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Vehicles used by a disabled person
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Vehicles made before 1 January 1983 ('classic cars')
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Mobility vehicles and powered wheelchairs
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Alternative fuel cars / electric vehicles (except hybrid electrics)
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Mowing machines
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Steam vehicles
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Vehicles used for agriculture, horticulture and forestry
Remember the Tax Disc?
Yep, they were discontinued in October 2014, so you no longer need one. The government decided that doing away with it would save on costs and make the system a whole lot cheaper to run, and they're not wrong. So it's been scrapped in favour of an online system.
Obviously though, you still have to pay. In fact, it's a lot tougher for cheaters to escape unpunished now, considering that the DVLA uses an extensive database to check who's paid and who hasn't.
How Do I Know When it’s Time to Renew my Tax?
The one handy thing about tax discs was that they made it easy to find out when your next tax was due. It was right there on your front windscreen, after all.
Now, you have to find that information online. It’s a simple case of heading over to the DVLA website and using the DVLA road tax check service. They hold a record of all registered vehicles along with their tax and MOT status. The only thing you need is your car's registration number, and voila … you’re good to go. Alternatively, the Government website is always a safe back-up option.
That being said, you will receive letters nearer the time (a Renewal Reminder, the forms are called V11s and V85/1s), so you'd have to be pretty forgetful for things to go wrong. Also, some garages offer a yearly reminder service when you get a MOT done, which is a good indication that your tax is probably due as well.
How to Pay Your Car Tax
You can do it via the post office, online, or over the phone. Just make sure that your car has a valid MOT (which has to be valid from the date your vehicle tax starts or the date your vehicle tax is issued), otherwise the process can't be completed.
Online is by far the easiest way. This is done using the Gov.uk website, where there's a section called 'Tax Your Automobile'. Just follow an easy step-by-step procedure using the reference number in your last V11 reminder letter. Similarly, a 24-hour tax service for automobiles is provided via the DVLA telephone number.
You can pay your tax in one annual lump sum payment or via direct debit instalments (which works out slightly more expensive). No driver is required to register to make a direct debit. A notification of direct deposit payments is sent to account holders via email correspondence.
Road Tax on Motorcycles, Mopeds and Motor Tricycles
Because motorcyclists, motorbikes and tricycles give off less emissions than petrol and diesel cars, they're less expensive to tax.
What About Cyclists?
They don’t pay road tax, which is another reason given by road-rage induced drivers for getting angry with them (just check out the countless number of YouTube videos devoted to it), with the rationale being that they are paying for the roads and the cyclists aren’t.
However, that argument doesn't really hold up, because we mentioned earlier how car drivers aren’t really paying for use of the roads per se, but instead the use of their car on those roads.
So, think twice, drivers …
What Happens if You Don't Tax Your Vehicle?
If you’re caught driving without tax, you could potentially face an £80 fine from the DVLA (which is reduced by half if you pay within 28 days).
Whilst you won’t get any points on your license, your vehicle could be clamped until you pay up. And if you don't comply, the case could even go to court, meaning the fine might potentially increase to up to £1,000 as well (plus court fees).
And just for the record, UK police use Automatic Number Plate Recognition to check if a car is taxed, so it's probably easier than you think to get caught. Bottom line: don't try it!
However, there are a few situations where it’s acceptable to drive without paying for vehicle tax even if you drive a car that would otherwise have to be taxed. These are:
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If you’re taking your vehicle to a garage or dealership for its pre-booked MOT
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If you suffer from a disability
Leasing Includes Road Tax
Just for the record, the hassle of road tax is covered as a part of all lease deals. You'll still pay for it, but you won’t have to apply for it, so that's one administrative chore out of the way.
The reason for this is because it's the registered keeper of a vehicle who’s responsible for taxing the vehicle, and in the case of leasing, the registered keeper is the leasing company, not you.
That’s different with owning a car outright and some other forms of finance, where it's someone else who’s responsible for paying the vehicle tax.
Summary
Phew … that about covers it amigos!
Yes, we know the topic of tax can get a little boring, but now you hopefully have a clear idea of why it's needed, what that money's paying for and where it's going, and that it's not just being sent away into thin air.
Happy taxing!
FAQs
Is road tax used for roads?
Not directly, at least. The money that road tax raises is paid directly into the central government fund, which is used for projects that benefit everyone – including road work and maintenance.
How much does the UK government make from road tax?
For the 2022-23 period, the Office for Budget Responsibility estimates that road tax or Vehicle Excise Duty will raise £7.2 billion in revenue.
Do I have to pay road tax UK?
Yes, unless you're disabled or are otherwise exempt. And even if you don't have to pay it, you still have to register for it.
Do buses pay road tax?
Yes, but because they’re providing a public service and are more economical and efficient than cars, vehicle tax on buses is heavily discounted. Buses divide emissions by up to a maximum of 30 passengers (plus the driver) as opposed to a car’s 5 or 6 passengers, so they’re deemed far less pollutant per person.
Do cyclists pay road tax?
Nope, and that’s because bicycles don’t emit any emissions. As mentioned, cyclists are often on the receiving end of insults from car drivers because of this, which is unjustified, because vehicle drivers don't technically pay for the roads either.