Taxing a Leased Vehicle

Car tax, also known as vehicle tax, road tax, or Vehicle Excise Duty (VED), is a legal requirement for any vehicle driven or parked on public roads. In this article, we discuss what road tax is and whether your lease agreement road tax is covered.

What is Road Tax and why do I need it?

Vehicle Excise Duty (also referred to as vehicle tax, car tax, or road tax) is a recurring levy categorized as an excise duty. In the United Kingdom, it's mandatory to pay Vehicle Excise Duty (VED) for any motor vehicle intended for use or parking on public roads. If a vehicle is not utilized or stored on public roads, it must be declared off-road through a Statutory Off Road Notification (SORN) if it's not licensed.

Currently, vehicle tax rates are determined primarily by CO2 emissions, although in the past, they were calculated based on engine size. There are thirteen car tax bands (A to M), each defined by a specific range of tailpipe CO2 emissions as assessed in official testing.

Tax rates range from £0 per year for low-emission vehicles in Band A to £515 per year for vehicles emitting over 255 g/km of CO2 in Band M.

Contrary to common perception, only a fraction of Vehicle Excise Duty (VED) is allocated to road improvement projects, with the majority being deposited into a central fund covering various sectors such as healthcare and education. For instance, in 2009, VED generated £5.63 billion. However, in the 2015 budget, the government announced plans to earmark the revenue generated from VED for expenditure specifically on the strategic road network starting from 2020.

Is Road Tax included in a lease agreement?

Yes. All of our lease agreements from Stable Vehicle Contracts included Road Tax as part of the duration of the contract length.

For contract hire or personal contract hire arrangements, the funder assumes responsibility for vehicle tax throughout the agreement's duration since they retain ownership of the vehicle. Should there be an increase in vehicle tax costs during the agreement or any extensions thereof, the customer will be accountable for the additional amount and will be notified beforehand.

How do I know if my vehicle has been taxed or not?

You can check to see if your vehicle is taxed by visiting the DVLA Vehicle Tax website. You’ll need the vehicle’s registration number (number plate) in order to check.