Impact of taxing a vehicle online: why are more drivers not paying?

Since the UK ditched paper tax discs in favour of paying online in October 2014, the number of untaxed vehicles on our roads has trebled, according to the Department for Transport (DfT).

Government officials estimate that this increase in vehicle tax avoidance could cost the Treasury over £100 million every year, which means less revenue for essential road improvements. With debates growing around the correlation between the online vehicle tax process and a spike in tax evasion, Tilly Bailey & Irvine law firm, medical negligence solicitors, has investigated the issue to shed light on why more drivers are avoiding paying road tax than ever before.

Latest figures on untaxed vehicles

The latest DfT statistics show that 1.8% of motors — around 700,000 vehicles — are currently being driven without tax, which is an increase of 1.4% from 2015. Interestingly, this latest figure is treble the amount of the 2013 level, which was the final full year before the process of displaying paper discs in vehicle windscreens was abolished.

In 2016-17, the Driver & Vehicle Licensing Agency (DVLA) collected £5.87 billion in tax for UK motors. However, this is approximately £200 million less than the amount acquired between 2013-14. So, why is there a rise in vehicle tax avoidance and how great a part does the online tax system play?

Tax is no longer transferable between owners

A major reason many experts have attributed these tax avoidance figures to is the change in laws surrounding the buying and selling of cars. Previously, tax was carried over to the vehicle’s new owner when a vehicle was sold (as long as the tax disc had not yet expired). However, due to new regulations, road tax is no longer transferrable, and now, buyers must tax the vehicle themselves once they purchase it.

According to recent research, around 34% of vehicles without tax have changed owners since September 2016. So, it’s possible that the rise in non-taxed cars could be down to people simply not being aware of this rule, rather than actively avoiding paying tax.

Hike in road tax

The process of moving tax payments online potentially has little to do with the rise in drivers not paying tax. Instead, the reason might be because of the general increase in tax rates that is causing anger among drivers.

Under the latest rates, most new cars will incur significant rises in first-year tax (followed by a £140 flat rate). Plus, there’s now an additional £310 annual surcharge for new cars with a price tag of over £40,000 for the first five times you tax them. Could this be annoying drivers to the point that they choose not to tax their cars? Possibly, but, when you consider that a vehicle registered before 1 April 2017 won’t be subjected to these changes, it’s unlikely to cause a significant ramification and it doesn’t explain why cars older than this are being driven without tax.

Elimination of physical payment proof

Could this tax evasion be purely accidental? With the abolition of the paper tax disc, which had been in use since 1921, drivers lost a daily visual reminder to renew their tax when necessary.

But, considering the paper tax disc was abolished in 2014, is this an excuse? Despite tax payments moving online, drivers still receive renewal reminders from the DVLA and there’s the option to set up a Direct Debit to make the process even easier. You can also sort out your tax payments at the Post Office, if online payments are not your preferred option.

New tax penalties on diesel cars

Of course, the problem could be related to the government’s growing clamp down on diesel cars. In the Autumn budget, the Chancellor announced that every new diesel car will go up a vehicle excise duty (VED) band from 1 April 2018, if the motor does not meet relevant standards (called Euro 6 emissions standards). To elaborate, new vehicles must be tested to determine if they are liable for a tax increase. Although this new ruling does not include vans, any car that fails to meet Euro 6 emissions standards will be subjected to higher tax — which could be between £15-£500 more in first-year rates.

With the government stating it will outlaw all new diesel (and petrol) vehicles by 2040 and the abolition of tax exemption for low-emission petrol and diesel cars; could drivers be avoiding paying tax out of a feeling of unfair treatment? Under the new VED system, tax is only free for electric and hydrogen cars, which might be a sore point for drivers who were used to an exemption applying to them. According to Auto Express, most new car buyers will get a worse deal when it comes to tax under the new system, with predictions that drivers could fork out nine times more than they would have before.

Although tax is rarely a payment people make happily, it could be argued that there’s a feeling of unhappiness and resentment with regard to the new system, which might be contributing to the hike in tax avoidance.

What can be done about the situation?

With millions being lost every year that could go towards maintaining and improving road safety, how do we rectify the current condition? According to experts, education and better surveillance are key to solving the tax avoidance issue. Public affairs manager from the RAC, Nicholas Lyes, said:

“More must be done to educate drivers about how and when to tax their vehicle, coupled with stronger enforcement to make drivers who evade vehicle tax feel that they are going to get caught.”

Arguably, the UK needs to invest more in technology to detect cars that are not taxed on the roads, since authorities no longer have the visual indicator of a dated tax disc.

How to pay your tax under the new system

To pay your road tax online, simply:

Visit the DVLA website.
Fill in your reference number.
Check your details.
Select how you want to pay (i.e. every month, six months, or year).
Enter your card details, an email address and phone number.
Submit (you’ll get a reference number at the end as proof of payment).

The hike in drivers avoiding paying tax is a serious headache for officials. With lost revenue for road maintenance and lack of clarity regarding why it’s happening, coming up with a solution will be difficult and time-sensitive.