RAC Cars News


What The End Of The Tax Disc Will Mean For You

By raccars Published

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On October 1, the paper tax disc will be phased out: a staple of the British motoring scene will come to an end, with Vehicle Excise Duty in the future being managed entirely electronically.

Here, we outline exactly what the end of the road tax disc means for you – whether you’re buying, selling or simply running your car.

RAC have put together a run down of the New Road Tax Rules From October, because Half of UK Car Owners Unaware Of New Tax Disc Rules.

I am taxing a car I own

If you already own a car, you’ll know that when your road tax is about to run out, the DVLA sends you a reminder. The new system will run in the same way, and you can either pay online or at a Post Office – the only difference is that you now no longer receive a paper tax disc to display.

If you’re using the online system, the reminder form (called V11) contains a 16-digit road tax renewal code – quoting this calls up your details and gives you the options for taxing it. If you want to tax online but have lost the form, entering the 11 digit reference number from your V5C vehicle logbook will still allow you to tax a car electronically.

You can’t tax a car if you don’t have MOT or car insurance, though: the DVLA automatically checks these and won’t let you progress if they’re not valid.

From October 1, motorists will have the new option of paying for VED road tax by Direct Debit. This has been made possible by new systems installed in the DVLA to run the new electronic-only road tax system.

It can be set up to take payments annually, six-monthly or monthly. Direct debit remains valid so long as the car has an MOT – or until you either sell it or tell the DVLA; both will trigger an auto-stop to Direct Debit payments.

I am selling my car

Motorists will no longer sell used cars with road tax – any remaining tax will automatically be refunded once they inform the DVLA of the sale, something they’re legally obliged to do. Those who don’t inform the DVLA you've sold their car, you face a £1,000 fine.

A cheque will be issued in the post for the remaining road tax (although controversially, only for full calendar months remaining; motorists will ‘lose’ tax for any part-months left).

The refund system has had to be instigated because otherwise, there’s no way for used car buyers to know how much tax is left on a car. Taking away tax entirely removes the guesswork and also means used car buyers could get a little bit of cash back when they sell their car.

It also means those with expensive-to-tax cars don’t need to agonise over when to sell it in order to ensure they aren't left out of pocket.

I am buying a used car

Secondhand cars will no longer come with any road tax: the new owner must buy tax before they are legally allowed to drive it. This means used cars must also have a valid MOT and have been insured by the new owner before they can be driven away.

There are several ways of doing this. Online is the easiest – simply type in the code on the V5C/2 New Keeper Supplement and the DVLA system will guide you through the process. Alternatively, there is an automated 24-hour phone line.

Traditionalists can still tax their car at the Post Office. So long as it is taxed and MOTd, all they need is the V5C/2 New Keeper Supplement.

The changes do mean that secondhand buyers have to make sure the ‘big three’ are all sorted before they drive away their new car – MOT, insurance and now road tax. Critics suggest this will make buying a used car less straightforward so make sure you are prepared to make a few phone calls – and have all your documentation in place.

I want to check if a car in use has been taxed

Even though cars will have no visible tax discs in the future, it is easy to check if a car is taxed if you have access to a computer. Simply go to Vehicle Enquiry Service enter the registration details and a rich set of relevant information on that car will be displayed.

How they’ll catch the bad guys

The DVLA has introduced the new paperless road tax system because tax evasion rates are low and the capture rate of evaders is high.

Policing will be done by Automatic Number Plate Recognition cameras. Most police cars carry these and other cameras are expected to be rolled out: this will further improve detection rates of tax evaders. The fine for driving a car without road tax is £1,000.

Last year, 44 million tax discs were issued, and it is estimated the evasion rate is 0.6% - that’s around 210,000 cars. In 2012/13, road tax evasion was predicted to have cost the UK £35 million.

For those conscientious drivers who have saved all their old tax discs you can even Make Money From Your Tax Disc.

If you are unsure of which tax band you car is in have a look at the RAC New Car Tax Bands Explained.

Is it VED or road tax?

Most people know road tax as, well, road tax. The coloured disc on the windscreen? Why, the tax disc, of course.

Officially though, this is incorrect. It’s actually known as Vehicle Excise Duty, or VED. Few people actually use this term, but it’s worth knowing about the difference, given the big changes that will be happening with VED road tax this autumn.

Other DVLA changes

Paperless tax discs aren't the only changes made recently at the DVLA as the organisation looks to streamline, simplify and save…

  • No need for annual SORN renewal
  • Paperless car insurance
  • No printed MOT certificate
  • Paperless driving licences

How can I lower my road tax?

All this talk of road tax headaches means many people will be thinking about it with renewed interest. It’s a big expense – as it’s CO2-based, the dirtiest cars cost up to £490 a year to tax. How, then, can you cut your exposure to the vagaries of the VED system?

The obvious way is to buy a car that emits less CO2. The sweet spot is below 120g/km CO2: up to this figure, road tax is £30 a year. Above it, the cost jumps to £130. It reaches £175 when you go over 151g/km CO2 – the trick is to know the exact CO2 of any new car you’re buying to ensure you don’t get hit.

It’s particularly tricky in the 151-200g/km CO2 range. Here, road tax jumps aren't spread evenly across 10g/km bandings – as the cost jumps from £175 to £260, it’s important to track the emissions carefully. And try to avoid cars that emit more than 225g/km CO2 altogether – here, the price jumps from £280 to £475 a year…

Cars that emit 100g/km CO2 or less get free road tax. Drivers still need to apply for it through the systems detailed above, but they won’t actually have to pay anything. The barrier for this will likely lower in the future, though, as the government tightens the CO2-based tax system. If it’s free now, don’t expect it to be free forever.

Classic cars also get free road tax. As of the March 2014 Budget, this is based on a 40-year rolling exemption basis: it’s free this year for cars built before 1 January 1974, which will roll on to 1 January 1975 next year.

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