Surge in road tax evasion could cost more than £100m a year

The abolition of the paper tax disc has resulted in a threefold increase in the number of untaxed vehicles on UK roads – that equates to a potential revenue loss of up to £107 million per year...

Surge in road tax evasion could cost more than £100m a year

Latest figures from the Department for Transport show that 1.8% of vehicles in the UK were untaxed in 2017, compared with 1.4% in 2015 and 0.6% in 2013, the year before the Government abolished the paper tax disc.

With an estimated 755,000 vehicles now being driven around untaxed, this could cost up to £107 million in lost Vehicle Excise Duty (VED) revenue annually.

When the paper tax disc was discontinued in October 2014, the Government estimated it would face a loss of £10 million while vehicle owners adjusted to the change. However the losses are more than 10 times higher.

“It appears that having a visual reminder was an effective way to prompt drivers into renewing their car tax – arguably more drivers are now prepared to try their luck and see if they can get away with not paying any vehicle tax at all, or are simply forgetting to tax their vehicle when they are due to,” commented a RAC spokesperson.

“What’s more, a third of untaxed vehicles were those that changed hands, which is a strong indication that many drivers are still not aware that tax does not carry over when ownership changes. More must be done to educate drivers about how and when to tax their vehicle, coupled with stronger enforcement to genuinely make drivers who evade vehicle tax feel that they are going to get caught.”

Surge in road tax evasion could cost more than £100m a year

The number of people prepared to drive a vehicle they’ve declared as being off the road has also risen dramatically. In 2015 just 1% of cars with a current Statutory Off Road Notification (SORN) were being driven on the road. The figure for 2017 is 12%.

The latest statistics are based on a roadside survey by the DfT in June 2017, with vehicles being observed at 256 locations around the UK. Cars and vans were by far the most common car tax evaders, accounting for 79% of untaxed vehicles.

From 2020, VED will be used to fund improvements to the UK’s strategic road network, so this huge annual loss will need to be addressed by the Government so that it doesn’t have a detrimental impact on the budget.

What happened to car tax in 2017?

There has been a radical overhaul of the UK's system for taxing cars, known as Vehicle Excise Duty, or VED. The new regulations came into force on 1 April and made many cars much more expensive to run.

As before, the amount of VED you pay is still based partly on your car's CO2 emissions. However, while the government had been trying to push people into hybrid vehicles by making many of them free to tax, the benefit of choosing one of these was substantially reduced from 1 April.

New cars are still divided into 13 CO2 bands, which determine how much you pay in the first year of ownership. However, only zero-emission vehicles, such as electric cars, now qualify for the lowest band and are therefore tax-free.

From the second year onwards, zero-emission vehicles that cost less than £40,000 new remain free to tax, while a flat rate of £140 a year is payable for petrol and diesel cars that cost less than £40,000, while hybrids cost £130. All cars that cost more than £40,000 attract an additional 'Premium' fee of £310 for years two to six of ownership, regardless of their emissions.

This means that electric cars that cost more than £40,000 – and which currently qualify for free car tax every year – will no longer be the tax-busting option they are currently.

Surge in road tax evasion could cost more than £100m a year

Bear in mind, too, that it's the final list price of your car that determines the £40,000 threshold – if you buy a cheaper model but add options that take the price over that point, you'll still have to pay the Premium fee. In short, an option costing a few hundred pounds could end up costing you more than £1500 over five years in extra car tax costs.

Even if you negotiate a discount with the dealer that drops the price of the car back below £40,000, you'll have to pay the fee because the listed price will still be more than £40,000. The list price includes the delivery charge, numberplates and fuel, but not the new car registration fee.

Below, you'll find a full table detailing how much you have to pay in the first year and thereafter.

VED car tax bands for cars registered on or after 1 April 2017

| Emissions (g/CO2/km) | First year rate | Standard rate ||----------------------|-----------------|----------------|| 0 | £0 | £0 || 1-50 | £10 | £140 || 51-70 | £25 | £140 || 76-90 | £100 | £140 || 91-100 | £120 | £140 || 101-110 | £140 | £140 || 111-130 | £160 | £140 || 131-150 | £200 | £140 || 151-170 | £500 | £140 || 171-190 | £800 | £140 || 191-225 | £1200 | £140 || 226-255 | £1700 | £140 || over 255 | £2000 | £140 |Cars costing more than £40,000 pay £310 supplement for five years

How will the new bandings affect the cost of my next car?

The new rules still make it financially rewarding to own some pure electric cars. If you're looking for something like a Nissan Leaf, BMW i3 or Renault Zoe, then you will still pay no car tax.

If you're thinking of a premium electric car such as a Tesla Model S, however, then it will cost you much more to own because of the new £310 Premium supplement. Our advice here is to look for a car first registered before 1 April 2017 (find out more below).

Some of the hardest-hit cars are low-emission combustion-engined models and hybrids. Take the Nissan Qashqai, a former What Car? Car of the Year. Our favourite 1.5 dCi N-Connecta version emits just 99g/km of CO2; this meant, under the previous VED system, it qualified for free car tax. However, now the same car will cost you £120 in the first year and £140 thereafter. Over three years, that's an extra £400.

Vehicles that produce higher emissions and more eco-friendly models with a list price of more than £40,000 are even more severely penalised. So if you're thinking of buying a car with a big diesel engine, such as the Range Rover Sport 3.0 SDV6, you may want to reconsider, because the cost of taxing it for three years is doubling from £815 to £1700. This is because its relatively high emissions mean you have to pay more car tax in the first year, and then the £310 Premium fee on top of the £140 standard rate for the following five years.

In contrast, cars that were 'dirty' enough to be in the top tax band previously actually work out cheaper if you keep them for more than five years.

What about second-hand cars registered before 1 April 2017?

If you bought your car before 1 April 2017 or buy a second-hand car that was registered before this date, you won't be affected by these changes because they only apply to cars registered on or after that date. Older cars will continue to be taxed according to the old system of CO2 emissions, meaning that, in the vast majority of cases, you'll be better off. Below are tax rates for cars registered before 1 April from the second year onwards.

| VED band | CO2 emissions (g/km) | Annual rate ||----------|:-------------:|------:|| A | Up to 100 | £0 || B | 101 - 110 | £20 || C | 111 - 120 | £30 || D | 121 - 130 | £110 || E | 131 - 140 | £130 || F | 141 - 150 | £145 || G | 151 - 165 | £185 || H | 166 - 175 | £210 || I | 176 - 185 | £230 || J | 186 - 200 | £270 || K | 201 - 225 | £295 || L | 226 - 255 | £500 || M | Over 255 | £515 |

So, how much more does it cost to own a new car under the revised tax system? What Car? has worked out the costs over three years for some of the UK's most popular models. Click through to the next page to view the results.

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