Vehicle Excise Duty (VED), commonly referred to as road tax, is a tax levied on most vehicles driven or parked on public roads in the United Kingdom. This obligatory annual tax helps fund road maintenance and transportation infrastructure.
History of Vehicle Excise Duty
The concept of VED dates back to the early 20th century, specifically introduced in the Finance Act 1920. Originally, it was intended to fund road construction and maintenance exclusively. Over time, VED has undergone several transformations to align with environmental policies and economic changes.
Types of Vehicle Excise Duty
Vehicle Excise Duty is categorized based on various factors:
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CO2 Emissions-based VED: This is the most common form, where the tax amount is calculated based on the vehicle’s CO2 emissions.
$$ \text{VED} \propto \text{CO2 Emissions} $$ -
Engine Size-based VED: Applicable to vehicles registered before March 2001, the tax is based on engine size.
-
Alternative Fuel Vehicles (AFVs): Vehicles running on alternative fuels (e.g., electric, hybrid) are subject to different VED rates encouraging environmentally friendly choices.
How VED is Calculated
VED is calculated using a tiered system determined by a vehicle’s CO2 emissions. Here’s a simplified view:
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For vehicles registered after April 1, 2017:
$$ \text{Initial Rate (First Year)}: \text{Depends on CO2 emissions} $$$$ \text{Standard Rate}: \text{Flat rate, £150 for petrol/diesel, £140 for AFVs (2021 rates)} $$ -
Additional Supplements:
$$ \text{Premium Vehicle Supplement}: \text{£325 for vehicles costing over £40,000} $$
Special Considerations
- Zero-emission Vehicles: Fully electric vehicles are exempt from VED.
- Historic Vehicles: Vehicles over 40 years old are usually exempt due to their historic status.
- Disabled Drivers: Exemptions are available under certain conditions.
Examples
-
A New Petrol Car (2023 Model):
- CO2 Emission: 150g/km
- First-Year Rate: £220
- Standard Rate: £150
-
An Electric Vehicle:
- CO2 Emission: 0g/km
- First-Year Rate: £0
- Standard Rate: £0
Applicability
VED applies to all vehicles that use public roads in the UK, including cars, motorcycles, and vans. It also extends to motor homes and goods vehicles with varying rates based on vehicle specifications.
Comparisons with Other Taxes
- VED vs. Fuel Duty: While VED is an annual tax based on emissions or vehicle type, fuel duty is a tax on the fuel purchased.
- VED in the UK vs. Car Tax in the US: The structure and rates of VED differ significantly from car taxes in the US, where local governments might levy similar taxes.
Related Terms
- MOT (Ministry of Transport) Test: An annual test for vehicle safety, roadworthiness, and emissions.
- Congestion Charge: Additional charges applied to vehicles operating in congested areas, like central London.
FAQs
Can I legally drive without paying VED?
Are certain types of vehicles exempt from VED?
How often must VED be renewed?
References
- UK Government, “Vehicle Tax Rates,” available at gov.uk.
- Finance Act 1920, available at legislation.gov.uk.
Summary
Vehicle Excise Duty (VED) is a crucial component of the UK’s approach to vehicle taxation, designed to promote environmental responsibility and contribute to the transportation infrastructure. Understanding its various types, calculations, and exemptions can help vehicle owners navigate their tax responsibilities effectively.
