What is Vehicle Excise Duty?
Vehicle Excise Duty (VED) is a tax applicable to most UK-driven and parked vehicles. Unlike typical manufacturing levies, VED for cars registered from April 2017 is initially based on carbon dioxide emissions with subsequent years not tied to these emissions.
Origins of Vehicle Excise Duty
The UK’s vehicle tax dates back to the 1888 Customs and Inland Revenue Act, initially designed to limit and control car usage. By 1904, car registration numbers were mandated, and by 1906, road conditions came into focus. A significant shift occurred in 1909 with the introduction of a car engine power-based tax to fund road improvements.
In 1910, the Road Board was established to oversee road policies. This was replaced by the Road Fund in 1920, but misuse of funds led Winston Churchill to dub it the “Raid Fund.” From 1937, VED revenues fed into the consolidated fund, with the Road Fund acting as an administrator until it closed in 1956.
The abolition of VED in favor of higher fuel taxes was debated in the late 1970s but overturned in 1980, hence retaining the vehicle tax system.
The Changing Structure of Vehicle Excise Duty
1997 saw a push to link VED to carbon dioxide emissions. By the 1999 UK Budget, new cars were sorted into one of four VED bands based on emissions, offering cleaner fuel incentives. This structure expanded in 2002, 2003, and 2006 with additional bands and culminated in 2009 with 13 bands for new car classifications.
Most Recent Developments in VED
The year 2014 marked the end of the paper tax disc system, replaced by an electronic vehicle register and Automatic Number Plate Recognition to ensure compliance. By 2017, a comprehensive overhaul redefined VED bands and rates, significantly altering the tax burden on different types of new cars.
Explore the evolution of VED to understand its impact on your wallet and the UK roads.
Related Terms: vehicle tax, carbon dioxide emissions, road infrastructure, consolidated fund, fuel tax, automatic number plate recognition.
References
- U.K. Government. “Vehicle Tax Rates”.
Get ready to put your knowledge to the test with this intriguing quiz!
---
primaryColor: 'rgb(121, 82, 179)'
secondaryColor: '#DDDDDD'
textColor: black
shuffle_questions: true
---
## What is Vehicle Excise Duty (VED)?
- [ ] A tax on vehicle maintenance
- [x] A tax that must be paid for most vehicles to be driven on public roads in the United Kingdom
- [ ] A tax on imported vehicles
- [ ] A tax on public transportation
## Which body is responsible for collecting VED in the UK?
- [ ] HM Revenue and Customs
- [x] Driver and Vehicle Licensing Agency (DVLA)
- [ ] UK Home Office
- [ ] Department for Transport
## How is the rate for VED primarily determined for cars registered after April 2017?
- [ ] Engine capacity
- [ ] Number of seats in the vehicle
- [x] CO2 emissions
- [ ] Age of the vehicle
## What happens if a vehicle is not taxed with VED?
- [ ] The vehicle is automatically insured
- [x] The owner may face fines and penalties
- [ ] The vehicle is exempt from MOT testing
- [ ] There are no consequences
## Are electric cars required to pay VED under current UK legislation?
- [ ] Yes, at the highest rate
- [ ] Yes, at a reduced rate
- [x] No, fully electric cars are generally exempt from VED
- [ ] Only if they have a certain range
## What is a SORN in the context of VED?
- [x] Statutory Off-Road Notification
- [ ] Standard Online Revenue Notice
- [ ] Special Off-Roader Nomination
- [ ] Secondary Ownership Registration
## How often do vehicle owners usually pay VED?
- [ ] One-time payment
- [ ] Daily
- [ ] Quarterly
- [x] Annually or monthly instalments
## Can VED be transferred when selling a vehicle?
- [x] No, the new owner must tax the vehicle before driving it
- [ ] Yes, it transfers automatically to the new owner
- [ ] Yes, but only if both parties agree
- [ ] Only for vehicles over ten years old
## For what purpose does the revenue from VED primarily go?
- [ ] Exclusively road and infrastructure maintenance
- [ ] Subsidies for electric vehicles
- [x] General UK government revenues
- [ ] Vehicle registration system funding
## What impact did the change in the VED system in 2017 have?
- [ ] Increased rates for all vehicles
- [x] Changed how charges for new cars are calculated, particularly based on emissions
- [ ] Decreased rates for all vehicles
- [ ] Made VED payable every five years
