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How tax works

how tax works

Road tax (VED) - how it works

Written by Richard Dredge

As far back as 1920, car owners have had to pay road tax for their car, and until October 2014 they will have to display a tax disc in their windscreen to show they’ve coughed up.

From October 2014 there’ll be no requirement to show a disc, but nothing else has changed; car owners still have to keep their vehicle insured and MoTed – and taxed too, of course.

Originally, road tax was just that; it was a charge to use the roads and the money raised was spent on road maintenance.

Since 1937 though, the cash raised from road tax – otherwise known as Vehicle Excise Duty (VED) – has gone into the government’s general coffers, so it’s been classed as general taxation

There used to be a flat rate for road tax if you ran a car, but for years now things have been more complicated, because cars are generally now taxed according to their CO2 emissions .

However, it doesn’t stop there, as older cars don’t have an official CO2 emissions figure, so they’re taxed differently. That’s why there are different taxation regimes in place depending on a car’s age.

These different regimes are detailed below; suffice to say that if you stick to a small car with a small engine, you’ll be paying relatively little to tax it.

However, some older small cars emit a surprising amount of CO2, so a tiny tax bill can’t be taken for granted.

You can find out what a car’s CO2 emissions are by clicking here. or you can find out what the road tax bill will be by clicking this link .

Road tax is adminsitered by the DVLA (Driver and Vehicle Licensing Agency) in Swansea. You can tax your car by phone (0300 123 4321), at a suitable Post Office (not all of them offer the service) or online .

For more information on how to tax

your car, check out the official website .

Here’s what you pay:

Cars built up to 1 January 1974

These are classed as historic, they’re assumed to be used very sparingly, so from 1 April 2014 they’re free to tax. That’s the good news, but a lack of practicality, big fuel bills and costly insurance tend to make classic cars a tricky proposition for young drivers. For more, check out our section on buying and running a classic car .

Cars built after 1 January 1974 but registered before 1 March 2001

This couldn’t be much simpler; if the engine is smaller than 1549cc a lower rate of road tax is paid, while cars with an engine of 1549cc or more pays a higher rate of tax.

Cars registered between 1 March 2001 and 23 March 2006

These are split into 11 bands (A to K) depending on their CO2 emissions; the more CO2 the car generates, the higher the tax bill.

Cars registered after 23 March 2006

These are split into 13 bands (A to M) depending on their CO2 emissions; the more CO2 the car generates, the higher the tax bill.

If you keep your car on a public road it must be taxed, even if you don’t drive it. If you’re not planning to drive it and you’ve got somewhere to keep it, you need to declare SORN on it .

You can tax a car for six or 12 months at a time; once you’ve handed over the cash you can claim some of it back if you decide to take your car off the road. You can claim only for complete (unused) months, but if you want to use your car for eight months of the year (for example), you can pay for 12 months’ tax, then claim back four of them – as long as you don’t then keep or drive your car on a public road. For more on this, read our page on SORN .

Category: Taxes

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