A Guide to Vehicle Tax


author image - crispin

By Crispin O'Toole-Bateman

on Friday 26 April 2019


Vehicle Tax

What is vehicle tax?

Correctly called Vehicle Excise Duty (or VED), and also referred to as road or car tax, vehicle tax is an annual payment made to the government to pay for the right to use UK roads. Without it, you are limited to driving around your own driveway and any fields or other land you might own!

What does car tax pay for?

In the early days of car tax, it was assigned to the local government for road fixing, but eventually, the system was nationalised and now your VED goes into the general budget – meaning your road tax is as likely to pay for the NHS or education services as it is for potholes and motorway expansions.

Every year, the DVLA pulls in over five and a half billion pounds in vehicle excise duty, so it’s an important and significant tax that is treated seriously.

How can I avoid vehicle tax?

Unfortunately, if you want to keep a car in the UK, you are probably going to end up paying your share of road tax. That said, there are three main ways to avoid paying vehicle excise duty:

1 – Go electric

Vehicle excise duty has long been tied with keeping emissions down and at the rock bottom of the emissions tables are fully-electric cars. Choosing an electric car makes you completely exempt from the annual cost of road tax – and it looks to stay that way for the foreseeable future, so if you want to pay nothing, getting an electric vehicle is a great way to do so.

2 – Take your vehicle off the road

If you don’t plan to drive on the road then there’s no reason for you to pay for it. Obtain a Statutory Off-Road Notice (SORN) from the DVLA and you’ll be totally exempt from road tax for that car. Of course, if you then want to drive it on the road, you’ll have to start paying tax again, but that’s only fair.

3 – Lease your vehicle

Ah! You knew there was a reason we were talking about VED here at Complete Leasing! It’s true – by leasing your vehicle, you can get out of paying road tax for the entire length of your contract because it’s included in the lease price!

Is that because of a government scheme pushing people to lease or because leased cars are in some way better for the country than personally-owned vehicles?

No – it’s because the leasing companies are nice enough to pay the road tax for you! Unless you specifically ask to take on the vehicle excise duty (and why would you?), they’ll take care of it all. Perfect.

Just be sure to double check that the VED is included, as there may be a few deals that exclude it. Generally though, it is included.

Why is road tax included in leasing?

There are a number of reasons for this:

1 – Leasing is meant to be simple

Over the years in the leasing industry, we have discovered a simple fact – people want a simple time with their leased car.

Part of getting a leased car is the pure, relaxed simplicity of it – everything is sorted out so that all you need to do is drive and enjoy a nice experience in your brand-new shiny vehicle.

And, while it is perhaps minor, having to sort out vehicle excise duty would add a layer of complication onto that smooth process. It’s one of the little attention-to-detail aspects that makes leasing such a joy!

2 – Extra incentives make for pleased customers

There’s nothing like seeing these little extra added-value incentives please you as a customer and make you eager to lease. And, why not? If there are extra little things the leasing company can do to make it more worthwhile for you, why shouldn’t they be done?

3 – Vehicle Excise Duty is usually paid by the vehicle owner

In order to pay VED, you need the V5C owner’s log book and that remains in the hands of the leasing company. It’s simply easier administration all round if the road tax is taken care of as part of the contract.

How much is the vehicle tax on a car?

VED rates are often reworked to take into account changes with technology and government requirements. The most recent change took effect in April 2017 and streamlined the entire process, giving two simple bands – one petrol and diesel cars tax rate and one for alternative fuels. As of April 2017, this results in car tax of £145 per year for traditional fuels and £135 for hybrid and other fuels.

The first-year tax rule

These 2017 changes got rid of the CO2 emissions banding that had been in place since the turn of the century, but it is still important for the government to charge higher tax for those vehicles with greater carbon dioxide emissions. To do this, they have imposed a higher charge on the first year following registration only, that ranges from £10 to £2,135 depending on your emission level.

Remember though, that when leasing a car, the road tax is paid for you – meaning even if you would typically be liable to a higher band of tax totalling over £1,000, it’ll cost you nothing! It’s one of the many advantages of car leasing.

The £40,000 rule

Additionally, those who own a car valued at £40,000 or greater will have an additional £320 per year of tax to pay from years two to six (a total of £1,600 spread over five years).

Of course, it doesn’t need pointing out that such a rule has little effect on those who are leasing their cars!

Older cars

Cars that were registered prior to April 2017 will fall under a different vehicle excise duty calculation which is based heavily on the vehicle emissions. However, as most leased cars are straight from the showroom with a registration date of the year you get the car, these more complicated tax calculations are less relevant.

How to check vehicle tax

If you are at all worried about your tax being up-to-date, then simply pop on to the government website and put in your registration number. Remember that it can take a few days for any new registration to update.

In order to get up-to-date vehicle excise duty, you need to make sure your car is fully up-to-date with its MOT (cars younger than three years don’t need an MOT) and that you have the log book (V5C) document.

If you are worried that your leased car isn’t taxed, give us or your leasing company a call for help.

Help me Complete Leasing! Do I need to pay tax on my car?

If you are getting a car through us then of course you don’t! Here at Complete Leasing we can find you the very best leasing deals and all of them will come with the vehicle excise duty completely taken care of. To speak to us about the perfect leasing deal for you, give us a call today or fill in our contact form to have someone get back to you at a convenient time.

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