What is road tax?

If you drive or park your car on a public road in the UK, you will probably have to pay road tax.  The tax raises almost £6 billion every year and the penalties for not displaying a tax disc are significant.

Our guide tells you everything you need to know about road tax.  Keep reading to find out what road tax is, how it came about and how much road tax you should be paying.

What is road tax?

Vehicle Excise Duty (VED) – commonly known as vehicle tax, car tax and road tax – is a tax levied as an excise duty which must be paid for most types of vehicle which are to be used or parked on the public roads in the United Kingdom.

If you use or park your car on public roads in the UK, you will normally have to pay road tax.  You also have to display a tax disc as proof of payment.  The tax disc cannot be issued without proof that your vehicle has valid insurance and a valid MOT.

Road tax raised £5.63 billion in 2009 and is collected and enforced by the Driver and Vehicle Licensing Agency (DVLA).

The history of road tax

The first road tax was introduced in the UK back in 1888.  A ‘locomotive duty’ was levied at £5 (around £410 in 2012 terms) for each locomotive used on public roads.

In the budget of 1909, the then Chancellor of the Exchequer, David Lloyd George announced that that vehicle excise duties would be used to make the roads system self financing.  So, from 1910, the proceeds of road vehicle excise duties were dedicated to fund the building and maintenance of the roads.

The Finance Act 1920 introduced a ‘duty on licences for mechanically propelled vehicles’ and these duties were first imposed in 1921, along with the requirement to display a vehicle licence (tax disc) on the vehicle.

In 1937, the ‘road fund’ was abolished and proceeds from vehicle excise duties began to be paid directly into the Exchequer.

What road tax do you have to pay?

The rates of road tax change every year in the Budget.  The road tax you pay depends on the age of your car and its carbon dioxide (CO2) emissions.  All the rates below are from 1st April 2012.

If your car was first registered before 1 March 2001, you’ll pay £135 for 12 months tax and £74.25 for 6 months tax if the engine size is under 1549cc.  If the engine size is over 1549cc, you’ll pay £220 for 12 months tax and £121 for 6 months.

If your car was first registered after 1 March 2001, there are thirteen separate bands depending on the carbon dioxide (CO2) emissions of your car (measured in g/km).  The current road tax rates are:

• Band A (up to 100 g/km) – No car tax payable
• Band B (101 to 110 g/km) – £20 car tax per year (no 6 month option)
• Band C (111 to 120 g/km) – £30 car tax per year (no 6 month option)
• Band D (121 to 130 g/km) – £100 car tax per year or £55 for 6 months
• Band E (131 to 140 g/km) – £120 car tax per year or £66 for 6 months
• Band F (141 to 150 g/km) – £135 car tax per year or £74.25 for 6 months
• Band G (151 to 165 g/km) – £170 car tax per year or £93.50 for 6 months
• Band H (166 to 175 g/km) – £195 car tax per year or £107.25 for 6 months
• Band I (176 to 185 g/km) – £215 car tax per year or £118.25 for 6 months
• Band J (186 to 200 g/km) – £250 car tax per year or £137.50 for 6 months
• Band K (201 to 225 g/km) – £270 car tax per year or £148.50 for 6 months
• Band L (226 to 255 g/km) – £460 car tax per year or £253 for 6 months
• Band M (over 255 g/km) – £475 car tax per year or £261.25 for 6 months

Brand new cars registered after 1 April 2010 with CO2 emissions of over 130 g/km attract a different rate of car tax in the first year.  For example, the tax on a brand new car with CO2 emissions of 170 g/km would be £275 in the first year, compared to £195 if the car was several years old.