Everything you need to know about the road tax changes

Jun 7, 2016

Paper discs have already vanished from windscreens and new rates are coming in from next year

Cate Gillon/Getty Images

Britain's road tax system is undergoing a major overhaul in an effort to modernise the system and save the government money.

The long-serving tax disc has already been consigned to history after a new system replaced the perforated paper circle in October 2014. Instead, an electronic database keeps track of who has paid their vehicle excise duty (VED).

Now new rates for newly registered cars will be introduced in April 2017. "Buyers who don’t have their wits about them could end up being hit hard in the wallet," says Auto Express.

With the threat of a £1,000 fine for motorists who flout the rules, it is worth understanding all of the changes. Here's a detailed list of everything you need to know: 

What has changed?

Since 1 October 2014, motorists have no longer needed to display a paper tax disc in their windscreens.

When it's time to renew your road tax, you can pay using the DVLA website, by calling 0300 123 4321, or by applying in person at post offices. 

Do the road tax changes apply throughout the UK?

Yes. The system is identical in England, Scotland and Wales. In Northern Ireland drivers will still need to display their MoT discs, but not their tax discs.

How can you check when your road tax is due?

The DVLA will send you a reminder when your digital tax disc is about to expire, but you can also use this official website to check whether your car (or anyone else's) is up to date with payments, simply by entering the make and registration number of the vehicle. It will also tell you when your MoT is due.

How is the payment system changing?

You can now pay by direct debit. You'll make a small saving of a few quid and your road tax will never expire as long as your MoT remains valid. When you sell your car, you will have to let your bank or the DVLA know, to ensure you don't pay more than you owe. HGVs and fleet cars cannot be taxed by direct debit.

Are there any downsides to the new system?

Yes: road tax will no longer be transferred with the vehicle, which means the buyer will not benefit if there are unused months left on the tax disc. They will have to renew the tax straight away, which they can do online or using a 24-hour automated phone system: 0300 123 4321. The seller can claim a refund from DVLA for any full calendar months left on the vehicle's tax, but will forfeit the remainder of the present month.

This has had many drivers up in arms. "What this means is that the government effectively collects two lots of tax on the car for the month where ownership is transferred," says Auto Express. "It's sneaky stuff and should give a useful boost to the exchequer, but at the expense of motorists." 

Confusion over the new rules has also been blamed for a dramatic rise in prosecutions for untaxed vehicles. According to DVLA data obtained by AutoExpress, 117,490 enforcement cases were created in the six months after the tax disc was scrapped, compared with 82,999 or 86,939 in the previous two six-month periods when the tax disc was still in operation. Out-of-court settlements also doubled from 53,799 to 97,348 in the six-month period, while the number of cars clamped for unpaid road tax has soared from around 5,500 per month to 8,800.

DVLA said the increase was caused by the system shake-up rather than any enhanced enforcement or motorists attempting to evade tax. AA president Edmund King said it was right that those who deliberately evade paying vehicle tax are "caught and punished". But he said it was "a very harsh lesson for those who may not be aware a tax disc is now automatically cancelled when a vehicle changes keepership".

Will the government make more money?

You might think the anger over the new system and the loss of up to a month when buying a new car might have been a revenue-raiser for the government – but they haven't.

The Financial Times reports that official figures from the DVLA, obtained via a Freedom of Information Act request, show the "amount of vehicle tax collected in the UK fell by more than £200m in the six months after the tax disc was abolished".

Between October 2014 and March 2015, £2.7bn was collected, £223m lower than in the same period a year earlier. In contrast, the £3.2bn collected between April and September 2014 was flat year-on-year.

It had been reported that the change cost the DVLA around £1m, mostly in IT costs and in what the National Audit Office described as "additional compliance and enforcement activity" to cope with "higher initial levels of non-payment".

It did not, though, expect a "material" change in the amount of revenue collected overall.

How much is road tax?

Currently, the rates depend on the officially quoted CO2 emissions for the car. For example, there are 13 bands for petrol and diesel cars, with owners of the cleanest vehicles paying nothing and those with the highest emissions incurring a charge of up to £505 per year. Owners of brand new cars face even higher charges (up to £1,100) in the first year after the car is registered. The DVLA website has a detailed breakdown of the rates.

However, Chancellor George Osborne announced in the Summer Budget that the system is due to change. From April 2017, a flat rate of £140 will be introduced for most cars, while owners of brand new cars could face even higher rates of up to £2,000 in the first year. Those who pay more than £40,000 for a brand new car will also have to pay a £310 supplement on top of the standard rate for five years.

The government argues that the system is being revised to make it "fairer and sustainable", encouraging drivers to buy the cleanest cars. Money raised will be put into a Roads Fund, with Osborne promising that "every single penny" raised will put exclusively towards highways maintenance by the end of 2020. 

The new rules essentially target new car owners, with Osborne promising that nobody will pay more road tax for a car that they already own. Cars emitting 0 grams of carbon dioxide per kilometre (gCO2/km) will continue to pay no road tax.

The new road tax system may also result in other savings, if insurance premiums fall as a result. Julie Daniels, head of motor at comparethemarket.com, told the Daily Telegraph that the replacement of tax discs with a more effective system, and the resultant elimination of tax dodgers from the road, "should have a positive impact on premiums".

What about classic cars and other tax-exempt vehicles?

Owners of cars that are exempt from vehicle excise duty will not have to pay anything, but they will still need to register each year on the DVLA website.

What fines can an untaxed car incur?

Car-owners face an £80 fine for failing to tax their vehicle, unless it is off the road and has been declared SORN (statutory off-road notification). This can be reduced by half if paid within 28 days, but could increase to a maximum of £1,000 if it goes unpaid and ends up in court. Offenders may also be lumbered with court costs if they are successfully prosecuted. Those caught driving a car without road tax by police face an on-the-spot fine, known as a fixed penalty notice (FPN), of up to £1,000. 

Hefty fees are also required to release an untaxed vehicle that is clamped or impounded. If a car is clamped, a valid tax must be paid for within 24 hours or a release fee of £100 will be charged, as well as a "surety deposit" of between £160 and £700 depending on the vehicle. This deposit is then refunded if the tax is purchased within two weeks. The fees are even higher to release an impounded car and prosecution costs and fines may still apply.

How can I claim a refund?

Drivers will automatically receive a car tax refund by cheque for any full months remaining when they tell the DVLA that their vehicle has been sold, transferred, exported or scrapped at an authorised facility. Refunds will also be made automatically if the car is taken off the road (as long as you have made a Statutory Off Road Notification) or if it becomes exempt from road tax (for example, vehicles used by organisations providing transport for disabled people). However, if the vehicle has been stolen, a refund will not be automatic and the driver will need to apply using a V33 form and the crime reference number. Refunds are usually received within four to six weeks and sent to the person named on the log book (also known as the V5C registration document). Payments made by direct debit will be automatically cancelled.

How will the authorities enforce the new road tax system?

Automatic number plate recognition (ANPR) cameras, which track all cars, will catch those who haven't paid up and trigger fines of up to £1,000. However, The Independent quotes a Home Office presentation which it says reveals that ANPR cameras misread four per cent of licence plates - up to 1.2 million per day. Since the system went live there have not yet been reports of significant numbers of penalties being issued in error.

Are drivers trying to take advantage of the new road tax rules?

Apparently not, at least according to the DVLA. Some motoring groups had suggested that the number of untaxed vehicles on the road might increase as a result to the new system, but those fears appear to have been unfounded. "There is the risk that the abolition of tax disc will encourage some people to believe these things won't be followed up," says Ian Crowder of the AA. "But from anecdotal evidence it seems to be working OK so far."

According to insurance comparison site Confused.com, the tax disc had been obsolete for some time as an enforcement tool. "Even before its abolition, the tax disc was not the chief means of ensuring VED had been paid," it says. Instead, the DVLA had used its own databases to keep track of who had not paid, and police had relied on the ANPR system to check for untaxed vehicles.

Can the system be fooled?

The new system could make it easier for car thieves to operate undetected, says The Sunday Times. "Without the need for a tax disc with the correct registration number, it will be simpler for crooks to disguise stolen cars using a set of fabricated numberplates that have been copied from a properly taxed vehicle of the same make, model and colour," the paper says. The ANPR cameras will not be able to tell the difference between the legitimate car and its ringer.

How do I make a Statutory Off Road Notification (SORN)?

If you are no longer using your vehicle on public roads and you do not want to pay road tax, you can make a Statutory Off Road Notification (SORN). It might be that you are mothballing a classic car for the winter or using a vehicle on private land only. You will need to ensure it is kept off public roads, even if it is parked and no longer used. For example, it will need to be kept in a garage, on a drive or on private land.

To make a SORN, you can apply online using either the 16-digit reference number on your vehicle tax renewal letter (V11) or the 11-digit reference number on your log book (V5C).You can also call 0300 123 4321 or send a SORN application (form V890) to the DVLA along with a letter explaining your circumstances. Those going abroad and leaving their car in the UK can make a SORN up to two calendar months in advance by post.

What about driving abroad?

Most European countries require some form of tax disc or sticker on the windscreen and some motorists have expressed fears that foreign police might look askance at vehicles not displaying any tax documentation. The British government says that the European authorities have been told about the changes. "DVLA have informed the European Union that from 1 October 2014, UK registered vehicles that are travelling in the EU will not display tax discs," it says.

How can I check if my vehicle is taxed correctly?

You can look up the tax status of any vehicle by using DVLA's Vehicle Enquiry System. You will still be sent a renewal reminder when your vehicle tax is due to expire, although some drivers facing fines have complained that they were not notified of the new rules.

A short history of the road tax disc

Strictly speaking, there is no such thing as road tax: the correct term is vehicle excise duty or VED. However, few people outside Whitehall refer to the charge as anything other than road tax, and the slip of paper that acted as proof of payment was universally known as the tax disc.

The first tax discs appeared in 1921 and were remarkably similar to the system in use until a few months ago. Although black and white, they consisted of a circular certificate bearing the make, model and registration number of the car. 

Perforations did not appear until 1938, and then disappeared again in 1942, to return in 1952. "This gap might have been caused by the destruction of the necessary equipment during World War 2," according to Motoring.co.uk.

The most substantial change in the administration of the system came in 1961, when drivers were able to buy a 12-month disc at any time of the year. Until then, all discs had expired on 31 December, whenever they had been purchased.

Over the years, various colours and an increasing array of security features were added, and it became possible to renew discs online. Nevertheless, by the time it was abolished last October the tax disc system was fundamentally unchanged from what had been introduced almost a century earlier.

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