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Road Tax Guide

Many of our customers are unsure whose responsibility it is to tax a leased car and whether the cost is included in the monthly payments. 
We at Applied Leasing Ltd have put together this short guide to explain the process and responsibilities.

What is road tax and what does it pay for?

Vehicle Excise Duty (also known as vehicle tax, car tax or road tax) is an annual tax that is levied as an excise duty. In the UK, it is a legal requirement to pay Vehicle Excise Duty (VED) on a motor vehicle which is to be used or parked on public roads. Vehicles that are not used or kept on public roads must be the subject of a Statutory Off Road Notification (SORN) if they are not licensed. 

Vehicle tax rates are currently based on CO2 emissions, although previously the ratings were calculated on engine size. Car tax rates are based on thirteen car tax bands (A to M) with each band being defined by a range of tailpipe CO2 emissions as measured on the official test. 

Rates vary from £0 per year for low emission vehicles in Band A to £515 per year for vehicles with CO2 emissions of over 255 g/km for vehicles in Band M.

Is road tax included with a lease agreement?

All lease agreements arranged by Applied Leasing Ltd include road tax either for the duration of the contract or for 12 months. The length of time tax is covered will depend on the type of contract taken. 

For contract hire or personal contract hire agreements, the finance house will provide vehicle tax for the duration of the agreement, as they will remain the registered owner of the vehicle.

Note: If the cost of the vehicle tax (VED) is increased by the exchequer during the term of the agreement, or any extended term, the customer will be liable to pay the amount of the increase.

For contract purchase, personal contract purchase and lease purchase, (e.g. types of agreements where you take ownership of the vehicle) or finance lease agreements, the finance house will typically only provide tax for the first 12 months.

Who is responsible for taxing a leased vehicle?

In order to tax a vehicle, the registered owner or keeper must have the VED reminder letter (V11) or registration certificate/log book (V5C). For contract hire or personal contract hire agreements, as the finance provider is the registered owner and keeper of the vehicle, they are responsible for providing the vehicle tax for the duration of the agreement. 

From October 2014, paper tax discs were no longer being issued as licence details are now stored centrally on a database. Vehicles still need to be taxed but physical tax discs will no longer be sent out by finance providers.

How can I check that my leased vehicle has been taxed?

If you are on a contract hire or personal contract hire agreement and want to check that your vehicle has been taxed, you can check your lease vehicle has up-to-date vehicle tax by visiting the DVLA website

Please ensure that you have the following details to hand.

  • The registration number of the vehicle 
  • The make of the vehicle

If, for any reason, your vehicle tax is out-of-date, it is important that you call your finance provider ASAP to report the issue. This is incredibly important as if your vehicle is untaxed, it can be wheel clamped or instantly impounded. 

Do you have another question relating to taxing a leased vehicle? Call Applied Leasing Ltd on 0800 525 209 and we'll be more than happy to help.

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