For decades, car owners would display a round paper car tax disk in their vehicle windscreen, that showed the month and year the vehicle tax was paid up to.

In 2015, as processes in many industries went digital, the way you pay car tax in the UK changed completely. The government legislated for car tax payments to be automatic with no need for a paper tax disc. As a result, the DVLA saw a fall of £93 million in their revenue the following year.

However, due to no longer needing to display a tax disc and more automation for the process, some people may have found it more difficult to remember when this is due, meaning late payment or even a DVLA fine.

At QuidMarket, as a direct lender of short term loans, we know how frustrating it is when you cannot pay an important bill on time, especially when other unexpected costs come up. Below, you’ll find out more about the current processes, how to pay car tax in the UK, and how to ensure you can pay on time in future.

What is Car Tax & What Does it Pay For?

Formally known as Vehicle Excise Duty (VED) and commonly known as road tax, car tax in the UK is a compulsory payment for all vehicle owners using or parking on public roads.

These days, car tax is administered online for convenience. If you do not pay the car tax on your vehicle, you may be subject to disruptive and expensive clamping of your vehicle until it is resolved, or the vehicle is removed by the authorities.

Car tax is effectively a road fund licence payment, with all monies collected going to the Exchequer along with other tax revenue such as income tax and VAT. The Department for Transport is allocated a budget by the Exchequer, and they decide what to spend this on.

For example, it could go towards significant changes and improvements to the road infrastructure, including the update of motorways to smart motorways and the building of new roads. National projects such as these are funded by Vehicle Excise Duty.

A portion of the budget is filtered down to local councils who can spend it on essential repairs and resurfacing roads, new road layouts where increased or changed traffic volumes occur, or new car parks in certain circumstances.

In summary, the road tax (road fund license payment) does not pay for our roads, but instead, we pay car tax in the UK on each vehicle on the road. The type of vehicle you have will determine how much tax you will have to pay, with the more environmentally friendly the vehicle the better.

How to Pay Car Tax in the UK?

All vehicle owners must pay car tax in the UK, unless you are exempt or have a vehicle that is free to tax, e.g. an electric vehicle. This is now done fully online. To pay road tax in the UK and see the exemptions list, visit the GOV.uk website and follow the online instructions.

To pay road tax in the UK for your car, motorcycle, or other vehicles, you will need to use a reference number from:

  • a recent reminder (V11) or ‘last chance’ warning letter from DVLA
  • your vehicle log book (V5C) – it must be in your name
  • the green ‘new keeper’ slip from a log book if you’ve just bought it

If you do not have any of these documents, you’ll need to apply for a new log book.

Once you have this, you can pay car tax using a debit or credit card, or by Direct Debit. You can choose to spread the costs and pay monthly or six monthly, but there will be a 5% surcharge to do so. There is no surcharge for those paying in full yearly.

You must tax your vehicle even if you do not have to pay anything, for example, if you’re exempt because you’re disabled.

Why is my car not eligible for direct debit to pay tax?

The most common reasons for this are:

  • Insufficient funds or where a payer has cancelled their instruction
  • The account has been closed, transferred, or is not recognised
  • There is a dispute from the payer, such as the amount or due date

If you struggle to pay car tax via direct debit or if the payment failed, you will get an email from the DVLA. Usually, you will have approximately 4 days to rectify the money in your account so that the direct debit can try again. If it fails a second time, your vehicle will be no longer taxed. By reviewing all payments every time you apply or renew your car tax, this will ensure all your details are correct and that you are aware of the payment schedule if paying by direct debit.

What happens if I don’t pay my car tax?

Also known as road tax avoidance, it is punishable not to pay your car tax. The police and other authorities have direct access to the DVLA database which lists all cars taxed in the UK, giving them real-time access to records. This means that any officer, whether on foot or in a vehicle, can check a vehicle they suspect the owner has not paid tax for, instantly.

If you don’t pay car tax in the UK, you will be caught eventually, and your vehicle will be immobilised and removed from the road. You will also be penalised if you don’t pay car tax. Fortunately, over 98% of vehicles are taxed correctly, but the DVLA still had to take enforcement action on thousands of vehicles across the UK in 2021 that weren’t, including 97,013 in London alone.

Firstly, if your vehicle is clamped or is impounded for non-payment of car tax, you must pay the outstanding car tax – online – before trying to recover your vehicle. If you cannot pay online, a period of five days must pass after paying at a local Post Office before you try to recover your vehicle. The latter is an expensive option and may lead to vehicle owners considering how to pay this if they don’t have the funds available. They may seek urgent loans to help make repaying this easier with instalments, especially if they have no available emergency savings.

The penalties don’t stop there. If you pay to have your vehicle released from a clamp, it will cost you the car tax due plus a fee of £100. If you release it after 24 hours, the release fee goes up to £200 plus a storage fee of £21 per day!

Furthermore, if you haven’t paid your car tax when releasing your vehicle, you’ll need to pay a deposit to ensure subsequent payment of the tax within 14 days. This is £160 for a car or motorcycle and up to £700 for other vehicles. Failure to pay the outstanding car tax within 14 days forfeits this payment.

How to remember to pay your road tax

  • Set calendar reminders – put this on your phone or tablet for when it’s due based on the schedule sent to you by the DVLA and add an alarm.
  • Pay by direct debit – paying by direct debit means this will automatically renew each year, meaning all you need to do is check the schedule and ensure funds are in your bank account on time.
  • Check your vehicle tax online – if you are unsure of when you last paid your car tax, especially when not paying by direct debit, you can check your vehicle tax on the Gov.uk website. This will tell you if any vehicle is up to date with payments using the registration number and when the next due date is.

What’s the best way to pay road tax in the UK?

Budgeting and organising your finances can go a long way to help you always afford your road tax payments.

Running a car can be expensive, but choosing a vehicle that is economical and affordable to run can be much cheaper in the long-term. Ideally, there is no need to have a family-sized car unless you’ve got a big family. Not only are they expensive to run, but the tax for bigger cars can also be higher depending on the type of fuel. You can find full details about car tax bands at Money Helper. When looking to buy a car, it’s important to understand how much the tax will be for it so you can budget accordingly.

If you’re struggling financially and cannot afford to pay car tax in the UK, you are not alone. There are many people in the same position. If you have saved yourself an emergency fund, you may be able to use this. If you don’t have an emergency fund saved or there is not quite enough to cover the expense in full, you may need to look at alternative options, such as asking friends and family for financial help.

For those seeking cash loans or emergency loans to help, affordability is key and if a lender cannot determine you can afford the repayments required, they are not guaranteed to be approved. These should also only be used to cover an emergency or unexpected expense, so using any form of borrowing to cover regular essential payments or bills could be a sign of bigger financial difficulties.

There are several avenues of support should you need help to pay car tax in the UK. If you are in doubt about any kind of financial support, always speak to a trusted family member or friend, or seek professional support online before making decisions about borrowing money. Visit Money Helper for further information on buying and running a car and the associated costs.

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Warning: Late repayment can cause you serious money problems. For help, visit: www.moneyhelper.org.uk