What is Vehicle Excise Duty
Let me explain Vehicle Excise Duty, or VED, directly to you—it's a tax you pay for most vehicles driven or parked in the UK. Unlike a standard tax added at manufacturing, VED is something you handle ongoing. For cars registered from April 2017 onwards, the first-year rate ties directly to the vehicle's carbon dioxide emissions, but after that, the payments flatten out and aren't linked to emissions anymore.
Breaking Down Vehicle Excise Duty
I'm diving into the origins of Vehicle Excise Duty here, so you understand its roots. The first UK vehicle tax came from the 1888 Customs and Inland Revenue Act, aimed at limiting and controlling car use. By 1904, the British government required numbering and registering cars, and in 1906, the focus turned to road conditions. Then in 1909, they introduced a tax based on engine power, with proceeds going toward better road infrastructure.
In 1910, the Road Board was set up to handle road infrastructure policies. By 1920, the Road Fund took over, created by the government to fund building and maintaining UK roads, but often the money got diverted elsewhere. This misappropriation was so bad that Winston Churchill, as chancellor, dubbed it the 'Raid Fund.' Starting in 1937, VED payments went into the Consolidated Fund, and the Road Fund just administered until closing in 1956.
In the late 1970s, there were talks about scrapping VED and raising fuel taxes instead, but by 1980, they decided to keep the vehicle tax as is.
The Changing Structure of Vehicle Excise Duty
Now, let's look at how VED's structure has evolved—you'll see it's adapted over time. In 1997, discussions started about basing VED on a car's carbon dioxide emissions. The 1999 UK Budget set it up so new cars registered afterward fell into one of four VED bands based on emissions, with incentives for cleaner fuels within bands. Taxes on new cars were much lower than on older ones, pushing people to buy newer models. They added a fifth band in 2002, sixth in 2003, and seventh in 2006. The 2009 Budget announced an overhaul, creating 13 VED bands for all new cars.
Most Recent Developments in VED
Turning to the latest changes, in 2014 the government got rid of the paper tax disc that you had to display on your windscreen. They said it wasn't needed anymore because the electronic vehicle register and Automatic Number Plate Recognition could check licensing and VED payments effectively.
Then in 2017, there was a major overhaul of the VED bands and rates, which means car tax is now much higher or lower for certain new cars depending on their specifics.
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