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Car Leasing and Vehicle Excise Duty

In order to drive a vehicle on UK roads, you must ensure you have paid for Vehicle Excise Duty, which is commonly known as 'road tax'. There's a common misconception amongst many people that road tax only pays for the right to drive or own a car in this country, but it actually goes towards a lot more than that.

Understanding what road tax pays for, and why you need to pay it can be confusing, especially for new drivers. Whether or not you've been driving for years or you're only just buying your first car now, it's important you get to grips with this essential part of driving.

This guide will give you all the information you need to know about Vehicle Excise Duty, and how it affects your car leasing agreement.

What does Vehicle Excise Duty pay for?

Contrary to popular belief, road tax is not a real thing. It doesn't exist anymore, and hasn't since 1937, when it was discontinued here in the UK. The Vehicle Excise Duty people know today was introduced in 1988, but due to the road fund's history, it was still referred to as such by the general public. Your road tax payments go towards the following things:

  • Infrastructure projects
    The UK Government plans and orchestrates many projects that deal with the infrastructure of particular stretches of road each year, and they are designed to make driving easier, and to lessen congestion. For example, these projects could include the widening of roads, constructing tunnels, building new roads, and much more.
  • Road maintenance
    It's vital that the UK's roads are properly maintained, otherwise they would be left in disrepair and could cause accidents further down the line. Not only this, but driving on a potholed road can be very uncomfortable, and can play havoc with your car's suspension, so local councils and the Government ensure roads are repaired on a regular basis.
  • Other projects
    As with all tax, Vehicle Excise Duty goes into a larger fund that is split between many projects, and it's used to keep the UK's roads in good repair, and to ensure new roads are being built to keep up with the demand for this. There are over 34 million drivers on the UK's roads, if not more, and this means Vehicle Excise Duty is an essential payment.

Do all vehicle owners have to pay for Vehicle Excise Duty?

This is a bit of a tricky question, as while not all vehicle owners have to physically pay for the tax, they do need to ensure they have a visible tax disc on their car. Whether or not this shows that they are exempt from paying or not, they need to show this with a tax disc. If you don't have to pay, you'll be sent a 'nil value disc', which lets traffic wardens know so that you don't end up with a ticket, whereas those that are included in Vehicle Excise Duty will be sent valid tax discs.

Here are the following vehicles that may or may not need to pay for Vehicle Excise Duty:

Electric vehicles

Certain types of electric cars will be exempt from paying Vehicle Excise Duty; not all electric cars will get nil value discs. So long as the electricity that's used to power your green car is from an external source, it can be exempted. This can include cars that need to be charged at power points, or which have electric storage batteries that must be disconnected from power sources when being driven.

Vintage vehicles

If your car was actually made before 1st January 1974, it will be classed as a historic vehicle and will therefore not be applicable for paying Vehicle Excise Duty. This is because classic cars are seen as an important part of the UK's heritage, so it aims to keep classic cars on the road.

Mowers

So long as your mowing vehicle has been built for the purpose of cutting grass, it can be exempt from Vehicle Excise Duty. However, tractors with tow gang mowers aren't included in this.

Mobility vehicles

Vehicles such as mobility scooters and powered wheelchairs which have a maximum speed of 8mph can be exempt. They must also be limited to a maximum of 4mph when driving on footpaths, which can be enforced with a special limiting device.

Vehicles used by those with disabilities, or by nominated drivers

If you are disabled, you may be eligible for Vehicle Excise Duty exemption. This applies if you:

  • Have been classed as higher rate in the mobility component of the Disability Living Allowance (DLA) assessment
  • Have been classed as enhanced rate in the mobility component of the Personal Independence Payment (PIP) assessment
  • Be eligible and be receiving the War Pensioner's Mobility Supplement

In order for this exemption to apply, the vehicle that you're applying for the tax on must be registered under the disabled person's name, or the name of their nominated driver. You must also only ever use the car for the disabled person's needs - even if they were insured on it, a friend couldn't borrow the car unless the disabled person was also in it.

Vehicles used for horticulture, agriculture or forestry

A number of vehicle types that are used within these industries can use nil value discs, and they include:

  • Tractors
  • Agricultural vehicles
  • Light agricultural vehicles
  • Vehicles used for 'limited use' - journeys no more than 1.5km in length on public roads which are between land owned by the driver

Steam-powered vehicles

All vehicles with steam engines can drive with nil value tax discs.

What vehicles can be taxed?

A number of vehicle types are included in the payment of Vehicle Excise Duty, including:

  • Private/light goods
  • Petrol cars
  • Diesel cars
  • Alternative fuel cars
  • Euro 4 light goods vehicles
  • Euro 5 light goods vehicles
  • Motorcycles
  • Tricycles

How much does Vehicle Excise Duty cost to pay?

The amount you pay for your road tax depends on the type of vehicle you drive and when it was registered. The make and model of the car will be used to calculate the amount of tax you'll pay, and in newer cars their CO2 emissions and the type of fuel they use is also taken into consideration.

      If your vehicle was registered prior to March 1st 2001, the tax rate you pay will be determined by the car's engine size.
      If your vehicle was registered after March 1st 2001, the car's emissions and fuel type will be used to calculate your tax rate.

The vehicles that can be taxed pay varying amounts of duty, depending on a number of factors. You can pay your tax in a few different ways as well, including all in one go (as a lump sum), over a period of 12 months, or over a period of six months. One thing to remember though is that the shorter amount of time it takes you to pay your Vehicle Excise Duty, the more money you'll save. Essentially, lump sum payments and six month payments cost less than 12 month payments.

What happens if I don't pay my Vehicle Excise Duty?

Not paying Vehicle Excise Duty is actually a criminal offence, as it's a legal requirement that all vehicle owners pay this duty, whether or not their car is simply parked on their driveway or they're actually using it.

The DVLA (Driver and Vehicle Agency) regularly checks records of registered cars to find out whether all cars have up-to-date and valid tax discs. If you do not, you will be penalised. Not only this, but members of the public can also report cars they see to not have valid tax discs to their local council, and this can result in your car being clamped or towed away so that you can't use it.

If you don't plan on driving your car, but still want to own one and have it in your possession (for example, if you keep your car in your garage and never drive it, but you don't want to have to get rid of it), you need to apply for a Statutory Off Road Notification (SORN).

A SORN essentially lets the DVLA know the reason for you not needing a Vehicle Excise Duty tax disc, so you won't be penalised for not having one. Instead, you'll display your SORN tax disc on your car's windscreen to ensure traffic wardens don't write you any tickets.

If you drive without a valid tax disc, you could be fined up to

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