Motorists who buy a six month vehicle excise duty (VED) licence have historically paid a ten per cent surcharge.
The Government has introduced a direct debit scheme for the payment of VED, to allow families and businesses to spread their tax payments. Under the scheme, the surcharge has been halved to five per cent when the tax is paid by six monthly and monthly instalments. The retention of a surcharge prevents a loss in VED revenue which would otherwise need to be made up elsewhere, by either increasing other taxes or reducing the Government’s investment in public services.
All VED revenues are paid into the Consolidated Fund to support general expenditure on public services.
The Chancellor of the Exchequer keeps all taxes under review as part of the annual Budget process.