Vehicle Excise Duty (VED) is more commonly known as road tax and is a perpetual source of political contention. The majority of adults in the UK are either car owners or regularly use a car or other vehicle, so road tax affects most of us. Furthermore, aside from the standard road tax payable to the DVLA and proved by your tax disc (which must be displayed in your windscreen), motorists are also hit by fuel duty, council parking charges, congestion charges, and all manner of other taxes.
So Where Does All the Money Go?
This is not a particularly easy question to answer. Frequently, tax rises are presented as necessary in order to cover the cost of a related expenditure. For example, the London Congestion Charge was supposed to pay for new upgrades to the Underground network. However, there is really no way of telling whether or not this is the case, as all tax income ultimately ends up in one of two places, depending on the tax.
DVLA Road Tax and fuel duty both end up in the coffers of the Exchequer, along with your income tax and companies' corporation tax. Council parking fees, along with the Congestion Charge if you live in London, are paid to the Local Authority, and are topped up by council tax and a subsidy from central government.
As can be seen, it is therefore very difficult to detail exactly how your road tax is spent, because it is divvied up in the same was as any other tax. However, there are certain related expenditures that we certainly rely on road tax and fuel tax to pay for.
Infrastructure projects are among the most important motoring-related expenditures. These include new road building and widening, tunnel construction and so on. These projects are frequently carried out in partnership with a private company, using a system known as a Private Finance Initiative (PFI). There are a number of notable PFI infrastructure projects including the Skye Bridge, for example.
Private Finance Initiatives are a useful tool for the government, as they allow massive new infrastructure projects to take place 'off balance sheet' – that is, the cost of these projects does not contribute to the national debt. PFIs have, however, ground to a halt in recent months as the private sector is finding it increasingly difficult to secure funds to carry out the projects.
Local Government Projects
Motoring taxes paid to a council are more easily traced to their eventual expenditure, as the projects they pay for tend to be concentrated in a smaller area and therefore more visible to residents. For example, your parking fees might well help pay for extended car park facilities, while your resident's parking permit is probably contributing to road resurfacing or a similar project. As has been mentioned, though, council income is topped up by central government – so,ultimately, you are also paying for these projects and services through your Council Tax and Income Tax.
Many drivers complain that the costs of driving are unfairly inflated by tax, particularly in the price of petrol. There may be some truth in this; driving is an easily taxable activity, because it is a necessity for many and individuals do not see the cost coming directly from their wage packet. However, it should be remembered that without these taxes both central and local government would find it even more difficult to carry out the infrastructure and repair projects on which a modern society relies.
There has been a noticeable decay in the standard of many roads over the past year or two, which will result in substantial injury, damage and cost to the public purse. The government has to inject more money into infrastructure, starting with road improvements, which will create jobs and boost the economy. Where will this extra money come from? Two places I would suggest.Tax on cyclists and driving license renewal fees.It is wrong to think that cyclists should be exempt as they cause no damage to the road. In reality, cars create a negligible effect on our roads also (roads are designed to withstand the forces from HGV's and thus the force from a car wheel has little or no impact) cyclists use and enjoy our roads like any other road user, during rush hour when they force cars into single lanes on dual carriageways, at night when they are barely visible until within 10-20 metres, etc etc therefore they should pay a contribution to the maintenance of the road network.Also by law motorists are required to update there license every ten years. It would be interesting to know how much unclaimed license fees exist at the moment. Perhaps if the police were made to enforce this law more closely and issue penalty tickets more readily, then the government would experience an influx in license update fees.
Daz - 26-Feb-13 @ 2:57 AM
So the new ford Eco boost is tax free ?, driving this car contributes to nothing really ! Dont get this ! Surely every car drivin on our roads should contribute in some way to our network system !!!!!
Ferris - 20-Jan-13 @ 6:00 PM
Vehicle tax - Road tax are the same thing! We pay tax for putting our vehicle on the roads and for the curtisy of using worn away, damaged, bodged and potholed disgracefull pieces of concrete called a road. It discusts me that money is sent to foreign countries while such maintainance as this around our country is left to ruins and not only damaging our vehicles but are health and safety hazzards for pedestrians on foot.
K - 12-Mar-12 @ 2:45 PM
I think its bad management by the goverment, Car tax should be spent on the road, rail fares should be spent on the railway, and tax on bankers should pay for the banks debt! Over the last 10 years they have double the road tax there twice the amount of cars on the road, yet the roads are crumbling under our feet!, I couldnt believe it when my mum showed me here car tax £210 for a polo 1.4L but if you drive one 12 years old its £130. How did they tax up before the excuse of global warning?
matt - 19-Feb-12 @ 3:24 PM
Firstly, who is having the laugh here. I will say the government, then your local garage, then the tyre and exhaust centre, then the government again if you have dodgy tyresand shocks and springs and so on. So its always amazing that football stadiums can have 60.OOO people voicing there anger over a lump of inflated leather, and maybe moan to everybody about the potholes that your lovely pride and joy hits every day of the week. Am confused. Billy fae Glasgow
billyvstrom - 3-Jan-12 @ 6:51 PM
It starts off by saying that you can never be certain where your road tax money goes then goes on to tell you how useful road tax is for building bridges. So what is the truth?
mich - 12-May-11 @ 4:51 PM
My car is now 29 years old, hand on heart I look after the old tub and it's in better nick than most 8 to 10 year old motors knocking about. Thanks to the labour government the 25 year tax exemption was scrapped. My car has more than payed for its use of the road over the last 29 road duty years. I was hoping to get tax exemption when it reached 25 years old but alas not, and I've just spent a fortune having it tuned and timed and recarbed to keep the emisions down.moan over!!.
landyman - 28-Apr-11 @ 9:51 PM
We've made some initial alterations to the article. We appreciate that it is actually VED, but many people do still refer to 'road tax' or 'car tax' so we've left those terms in, in order for people to find us when searching on those terms.
TheTaxGuide - 15-Apr-11 @ 9:53 AM
Road Tax was abolished in 1937. You pay VED and this is put into the general pot along with all other taxes and duties. Many things are then paid for from this pot of money. Specific duties are not allocated back directly towards where they are raised from. You don't see all alcohol duty being used to build more pubs for example.
Kreving - 15-Apr-11 @ 3:14 AM
Its *not* road tax, its VEHICLE EXCISE DUTY. The difference is that you are taxed for using your *motor vehicle* on the road, not for using the road. Bear in mind the speed and weight of motor traffic requires a high standard of road building and maintenance that just isn't necessary for other forms of traffic.You can walk, cycle or ride a horse on the road without paying VED. You would still be paying for roads through local taxes, VAT and income tax.
jakeonhisplanet - 9-Apr-11 @ 11:43 PM
Getting increasing frustrated at paying lots of tax and not knowing what it actually pays for....can anyone shed some light. This site tells me what my road tax should pay for, but then says its a little bit difficult to pin point it. All I know is the price of living and taxes are going up, and I am not seeing anything for it....well apart from the two huge pot holes outside my drive