The process for paying road tax when buying or selling a used car in the UK changed two years ago, yet it still causes confusion among motorists today. We have updated this article from 2014 to bring you an up-to-date explanation of how it all works.
Prior to October 2014, a used car could be sold with any existing road tax (vehicle excise duty if you want to use the official description) being carried over to the new owner. So if you bought a car which still had three months of tax left, you didn’t have to renew it for three months. It was simple, straightforward and everybody understood how it worked. So obviously the DVLA decided to completely screw the whole thing up.
Starting in October 2014, road tax no longer carries over when you buy or sell a used car. Instead, the new owner has to purchase road tax before taking possession of the vehicle from the previous owner. Understandably, this creates additional hassle for buyers, as you have to either go online or call the DVLA and pay road tax before you can drive off in your car – even though the previous owner has already paid road tax for the vehicle.
Because the DVLA is antiquated and unable to cope with the 21st century world we live in, it is only able to process road tax on a monthly or annual basis. So if you buy a used car on the 15th of the month, you have to pay road tax for the whole month. But the previous owner has already paid road tax for that month, and will not be refunded. Therefore the DVLA has effectively double-taxed the vehicle for that month.
Even if you are giving your car to another family member at the same address, the tax won’t carry over. So both buyer and seller have to tax the car for a full month each time a used car is sold or transferred.
Six million used cars are sold each year in the UK. Obviously not all of them are already taxed at time of purchase, but it still means that the DVLA is effectively stealing millions of pounds from British motorists each year by double-taxing sold used cars for a month.
What do you need to do as a seller?
Since you can’t sell a car with road tax anymore, the existing tax will be cancelled as soon as the DVLA receives notification of the ownership being transferred.
As a seller, you are obliged to notify the DVLA when you sell your car (or transfer ownership) to someone else. You will receive a refund for any whole months of road tax outstanding; so if you sell your car on the 1st of the month, you still have to pay a full month of road tax for that month. Unlike practically every other organisation on Earth, the DVLA can’t grasp the concept of billing by day rather than by month, and is perfectly happy to rip off British motorists with the government’s blessing.
If you fail to notify the DVLA that you are no longer the registered keeper of the vehicle, you could ultimately be fined up to £1,000.
What do you need to do as a buyer?
When you buy a used car, you must pay road tax prior to driving off in the vehicle. Before the vehicle hits a public road with you as the registered keeper (even if it’s just parked in the street), road tax must have been paid.
You can tax the car online (24 hours), by phone on 0300 123 4321 (24 hours) or at a post office (during business hours only, obviously, and not every post office handles vehicle tax). Unhelpfully, you also can’t set up a direct debit over the phone.
If you fail to pay the DVLA before driving away, you could be fined £80, or a maximum £1000 if the fine is not settled within 28 days. And of course, you won’t be insured if you’re not taxed.
No road tax = no insurance
If you car is not taxed then it will also not be insured. So not only are you liable to be fined, but if you were involved in an accident or had your car stolen, your insurance would not be valid.
If your scrap or export your car, you need to notify the DVLA and a apply for a Statutory Off Road Notification (SORN), which will remain applicable as long as the car is off the road. However, you can’t put the car back on a public road (even if it’s just parked on the street) until you pay road tax again.
How are road tax transgressions enforced?
As part of the 2014 changes to road tax rules, the DVLA decided to do away with the familiar round tax discs which previously had to be displayed in every car’s windscreen. So it’s no longer possible for a policeman to notice the tax disc on your car is out of date and whack you with a fine. However, in practice that very rarely happened anyway, and road tax checks are done electronically.
Police use Automated Number Plate Recognition (ANPR) cameras to catch owners of untaxed vehicles on the road, and had been doing so long before the tax disc was taken out of circulation.
The DVLA makes database checks on vehicles every month and also has the power to clamp vehicles which have not been taxed, forcing the owner to pay a release fee of £100 to be unclamped. Alternatively the car may be impounded, whereby a fee of £200 must be paid to release the car – and prosecution costs and fines may also apply.
Initial chaos has now subsided, but at a cost
Predictably, changing a perfectly simple and sensible system for a far more complex one caused widespread chaos throughout the UK. Many thousands of used car buyers were caught out by the changes, and many motor traders were confused by the changes as well, resulting in many cases where cars went untaxed for several months until owners realised (usually about the time their insurance or next road tax bill was due).
Despite warnings from organisations like the RAC that the number of untaxed cars would skyrocket under the new system, the DVLA rubbished those claims, describing them as “nonsense”. Yet, to absolutely no-one’s surprise (except the DVLA, presumably), that’s exactly what happened. The number of unlicensed vehicles more than doubled in the year after the new rules were introduced, with more than 560,000 untaxed vehicles costing the country a claimed £80 million. Two years in, it appears that the system is still failing, with hundreds of millions of pounds lost. Clearly, the massive increase in untaxed vehicles is unlikely to be the result of hundreds of thousands of motorists deciding to become criminals, so it suggests that the system is at fault. Of course, getting the DVLA to accept its failure is unlikely.
There is also the probability that at least some of the increase is down to vehicles no longer carrying tax discs in the windscreen, so owners are less likely to notice that their tax had expired. The DVLA claimed that doing away with tax discs would save the country millions, but it looks like it may have lost far more than it saved.
You should also read: Winners and losers of new 2017 road tax rules
This article was first published in September 2014, and has been updated in October 2016 to reflect the number of questions we continue to receive about the workings of the UK vehicle registration process.