Does the new vehicle tax system earn more cash for the UK government

Patrick McLoughlin

There have been many complaints that the new UK vehicle tax system is providing the government with extra revenue because when a vehicle is purchased the new owner is no longer allowed to benefit if there is any period of tax left to run before it expires.

The new UK vehicle tax system came into force on 1st October 2014; the new rules meant that although drivers still had to tax their vehicles, drivers were no longer legally required to display a valid tax disc on their vehicle. The AA and RAC have both voiced misgivings about the new system, the RAC is reported to have suggested that the number of motorists failing to purchase vehicle tax could actually reach the same high figures of those people who are driving around without purchasing vehicle insurance, they feel that the new vehicle tax system will result in a loss of £167 million a year due to vehicle tax evasion. The Driver and Vehicle Licensing Agency (DVLA) have called this nonsense and said there is “no basis” to the figures supplied by the RAC. President of the AA, Edmund King said that potentially there could be “issues for our patrols towing a vehicle which they will not know immediately if it is taxed. Likewise if a vehicle appears to have been dumped on the roadside the lack of a valid tax disc is often an indication that this is the case.” The AA are also concerned about the extra revenue they believe this new vehicle tax system will generate for the government, Edmund King said “Someone driving a car that costs £500 a year to tax would lose £41 if they sold it at the beginning of the month”, he continued “Likewise a buyer purchasing a car mid month would have to pay Vehicle Excise Duty for the entire month”, this would mean of course that in many instances when a vehicle has changed ownership both the seller of that vehicle and the purchaser will have paid vehicle excise duty (car tax) for the month in which the sale took place.

The DVLA said that the abolition of the paper tax disc means £10 million a year could be saved and that the new vehicle tax system would not result in a great deal of additional revenue for the government as a refund for car tax could only ever be claimed for each whole month of remaining unused tax, refunds for part of a month were never allowed.

Special Thanks Gareth Milner for providing the image