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The end of the tax disc

Most of us pay for our car insurance in affordable monthly payments, and many of us are paying for our cars themselves in exactly the same way. Yet up until now, your annual Vehicle Excise Duty (VED) or ‘road tax’ has always come as a lump sum payment once or twice a year, costing some people up to £490 per year. Fortunately, all that will change this year, thanks to a new system announced by the Chancellor George Osborne in his autumn statement.

Paying for wear and tear

Vehicle excise duty was introduced by another Chancellor called George, George Goschen, in 1888. He noted that only the most luxurious carriages paid towards the upkeep of the roads, even though other vehicles used and damaged them. He decided that all road users should ‘pay in proportion to the wear and tear they cause’ and so introduced a Wheel Tax on every vehicle.

Today, that principle still holds true, although vehicles are now taxed according to how much wear and tear they cause to the atmosphere, through CO2 emissions. The least polluting vehicles pay nothing while the gas guzzlers pay up to £490 per year.

The new system for car tax

There were three important changes announced for the car tax system, one of which has already taken effect and two others that come into force from October this year:

  • Since December 2013, you no longer need your car insurance certificate to tax your car at the Post Office, as the information will be checked directly with the Motor Insurance Bureau database.
  • Tax discs will no longer be used from October 2014.
  • From October 2014, you will be able to pay your VED by direct debit, either annually or twice a year, as with the current system, or spread the payments monthly if you prefer.
  • By simplifying the system, the government estimate they will save £8m per year in admin and paperwork. Many drivers will also save, because the new direct debit payments will only attract a surcharge of 5% on biannual and monthly payments, compared to the current 10% surcharge for spreading the cost.

    Hi-tech system maximises compliance

    A combination of hi-tech monitoring and a high profile advertising campaign has brought compliance with road tax payment up to an impressive 99.4%. Most people are aware that the police and other authorities do not need to see their tax disc to check the status of their vehicle, with number plate recognition software instantly identifying and checking vehicles. What’s more, the DVLA database can send you a fine automatically if you do not tax your car or declare a Statutory Off Road Notice (SORN).

    With road tax now available to purchase quickly and easily online, and the option to spread payments over 12 months, road tax is set to become far less taxing in 2014. George Goschen would be very proud.

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