Taxing motor vehicles has always been a sensitive subject for any government and for owners and drivers, but I suspect not too many countries can claim use of a system that goes back to 1747. Look closely at any of the photos of British cars on CC, and you’ll see a three inch paper disc in a plastic holder in lower left corner of the windscreen. That is the tax disc, and this is it its story.
From 1747, all horse-drawn carriages in the United Kingdom with two or more horses (so not the basic horse and cart) were subject to an annual tax to pay for road maintenance. Previously, many roads had been individually tolled by various owners and counties. Essentially this was a tax for the use of the road, and is the origin of the term “road tax”, still used today, if inaccurately. By 1889, this was £2 and 2 shillings each, or what was known as 2 guineas–say £150 now–and it was in this period that the first printed paper licenses were issued.
By the end of the 19th century, motor vehicles were appearing on Britain’s roads, and inevitably many pieces of legislation followed. A major one of these was the 1896 Locomotive Act, which removed the requirement for all self-powered locomotives to be preceded by a man carrying a red flag as a warning, and raised speed limits to 14 mph. Of course, the vehicles it covered were almost universally steam-powered but it caught early cars as well. This date is still marked today by the annual London-Brighton (around 60 miles south of London on the south coast of England) run for vehicles built before 1905, and attracts around 400 vehicles every November.
Another was the 1902 Motor Car Act, which required all cars to be registered and licensed by the relevant County Council for an annual fee (as an upside, the speed limit went up to 20 mph). This was the first road fund tax, although officially it was (and still is) an excise duty, and was set at £1 for each vehicle. From 1909, the declared plan was that the UK’s road system would be self financing, from vehicle excise duty which would be dedicated to road building and maintenance.
Also from 1909, the (in)famous RAC horsepower (a purely nominal use of the term with no relation to brake horsepower) rating was established and used for vehicle taxation. It was based on the bore and number of cylinders, so to manufacturers built long stroke engines to get round it. Amongst its effects, intended or otherwise, was an element of protectionism, and the reverse–a lack of international appeal. The rate in 1909 was £1 (say £60 now) per RAC horsepower.
In 1920, the Roads Act brought all these ideas together–a duty on county councils to collect the annual vehicle excise duty, for these funds to be ring fenced for the road system maintenance and building, and for all vehicles to display a vehicle licence disc, commonly known as the tax disc, still with us 94 years later.
The first examples were plain grey on white, and were said to resemble a contemporary Guinness drip mat, to the extent that the drip mat could make a plausible substitute at a quick glance
By 1923, colour was making an appearance, making forgery harder and compliance checks easier, and in 1927 Winston Churchill, as Chancellor of the Exchequer, formally removed the ring fencing of vehicle excise duty to road maintenance and building.
The excise rate was dropped in 1935 to 15 shillings (75p or around £30.00 now) for each RAC horsepower, as a stimulant measure for the motor industry, and the disc edge was perforated in 1938. This lasted until 1942, and did not reappear until 1952, as the necessary equipment was damaged or lost during the war.
In 1948, the RAC horsepower rating was abandoned to be replaced by a flat rate of £10 a year, say £250 now. In 1961, the concept of taxing a car for 12 months was introduced, rather than just until the end of the year. Yes, every car had to be re-taxed on 31 December… by reporting to an office with the necessary registration documents!
Perhaps the biggest change to the administration of the process came in 1974 when responsibility was moved from county councils to a new (computer controlled!) Government agency known as the Driver and Vehicle Licensing Centre in Swansea, south Wales. The DVLC (or now DVLA, for Agency) is known almost universally as “Swansea”, as in “I’ve sent the paperwork to Swansea”, and is either a successful example of geographically distributed government employment or the biggest administrative black hole yet created.
Since 2003, the rate charged for new cars has been based on the CO2, ranging from nil (tax-free) for cars with a CO2 rating of less than 100g/km to £490 for those over 225g/km. Although the difference between a modest car and a slightly less modest car is, in the scheme of car purchase and running costs, relatively small, the number of times you hear someone say that a car was chosen for its lower excise duty is surprising. It is therefore one of the more successful “nudge” policies seen in the UK. Also, cars first registered before 1973 are exempt, as are police and health service vehicles.
The first of October this year begins the next major change–the system will go entirely paperless. It has been possible to buy the tax disc on-line for several years now, as well at a post office, but displaying the tax disc in the windscreen (as well as having one) has always been an obligation, and omission a finable offence. But now the tax disc is going, and no more are being issued. Enforcement will be entirely by on-line check or by registration plate recognition camera spotting.
It is already a requirement to tax a car or declare it to be off-road–not taxing and not reporting is not an option. But the loss of the tax disc is quite a step, even if merely an emotional one. There is now nothing tangible to see for your money, and nothing to haggle over when selling or buying a used car. A line like “6 months tax” is common in a used car advert and unused tax a tool to use when trading in, but tax will now be linked to the owner and will be credited when the car is re-registered. Partly this is to keep it simple, but it is also an incentive to accurately and promptly report ownership changes – another nudge.
Driving a car, and seeing cars, without a tax disc is going to take a bit of getting use to for us Brits–after all, we’ve had them for 94 years and the system for over 260 years!
Fascinating! To those of us outside the UK who enjoyed UK car magazines, but didn’t really know what the term “tax disc” meant, this is really helpful.
It amazes me how people are prepared to pay a grand extra for a car because the “road tax” is only 30 quid a year. I had to talk my mother out of spending thousands replacing her perfectly adequate older Primera in order to save 190 a year.
I’d be surprised if 490 a year is going to send any Range Rover driver shopping for a Renault Twingo.
Interesting. Indiana has an excise tax on vehicles, too, paid annually with your license plate. It shocks most people who move here, as it makes plates seem super expensive. Really, the plate is not. The excise tax is.
Virginia localities, too, levy a personal property tax on cars. It’s an annual percentage of the Blue Book value, and it’s due in one lump sum in October, so can be a real budget buster for some families with a new car.
The tax is due if you garage a car in a given city or county — even if it has out-of-state plates. This comes as a rude shock to many out-of-state college students.
We had a governor elected a couple of decades ago on a promise to eliminate the hated “car tax.” The state was to have reimbursed the localities for the lost revenue. A recession hit while the phaseout was underway. As a result, personal property tax bills today are discounted by a payment from the state, but the tax has not gone away.
Traditionally we have had to display decals in the windshield (next to safety inspection decals) to prove the tax has been paid. Some cities and counties have stopped sending decals. Instead, they synch their databases with the DMV and prevent the renewal of license plates if the tax is unpaid. My city still requires a decal, which makes me grumble, because on top of the tax, there’s a $30 fee for the sticker.
This year’s tax is due next Tuesday. Where’s my checkbook?
… and check this out from my city’s Web page on the car tax:
Citizens may make confidential reports of decal violations on the Decal Violation Hotline at 703.385.7800.
Yeesh. I thought the Stasi had been put out of business.
What if you park a vehicle on a street and you are a college student? I knew VA was strict and had rules, but that all seems a bit silly.
In that case you’ll get ticketed until you cough up the tax and get a sticker. I think that’s why the City of Fairfax, where I live, has stuck with the stickers (so to speak). Lots of George Mason U. students live in Fairfax City, and the local cops carefully check windshields for decals on city streets.
I guess their justification is this: If you’re routinely parking overnight in the city, you’re driving on city streets, and you owe your share of the road maintenance.
Screw that. I don’t see Virginia’s roads being much better than Ohio’s, what are they spending the $$$ on?
I wasn’t happy when Hanover County did away with their stickers, as pictured is the old county courthouse, where Patrick Henry practiced law, where I was married in 2000, and where I’ll be married again next year.
I was shocked when I moved to go to grad school at Purdue and registered my 2 year old Monarch. I think I had to pay a couple hundred, and people told me excise tax on a new Seville was over a thousand. It was worth it, though, to pay Indiana rather than New Jersey insurance rates.
Maine is another state that charges an annual excise tax, based on a percentage of the vehicle’s original MSRP. The percentage is .024 the first year, drops to .004 by year six, and stays there.
In Ireland we have a tax disc, an insurance disc, and a test certificate disc all cluttering up the screen. And the tax is somewhat dearer than the UK……
In Spain we pay a similar tax, but it’s paid to the municipality. It’s called “Impuesto de Vehículos de Tracción Mecánica” (tax on mechanical traction vehicles) but we call it also “Impuesto de circulación”, its old name (circulation tax). It changes in many municipalities and you can see some large vehicle holders registering them in small towns with a smaller tax.
The taxing system is quite simple. It uses also a HP system, but adapted to the fuel and the cubic cm of the motor. So a 1.9 TDI car with 100Hp pays 145€ per year in Barcelona, for instance. The same car with a 1.6 Gasoline engine with 100HP pays barely 80€.
As Jim Grey stated above, I have always been used to having to pay excise tax as part of my license plate fee every year. Indiana’s system is based on the age of the car and its original value. The older your car, the lower the rate. An old beater may get by for $35, but a nice new car, even one of modest value, may run several hundred.
One quirk – when I owned an elderly Cadillac, it was always more expensive to register annually than other cars of the same age, just because it was classified as a luxury car.
Do you also pay sales taxes on new or used vehicle purchases?
Yes, in Indiana you also pay sales tax on new/used vehicle purchases. I am honestly surprised that any state doesn’t do this; here, at least, if you purchase a car out of state and pay that state’s tax, at least you don’t have to pay it again when you register the car here.
I grew up in Kentucky and the license tags there are a token amount but then vehicles are considered “personal property” and are taxed as such. When I started driving (late sixties) the annual fee for a Kentucky license plate was $5.00; this was raised to $12.50 in the early seventies and people screamed bloody murder for years.
I honestly wouldn’t mind paying the taxes if we got good roads out of it. Here in Indiana the roads are beyond crappy, some of the major interstates and US highways look like they have been bombed. I don’t want to turn this into any kind of political rant but I suspect what has happened is that various governments have siphoned off road use taxes (including vehicle registrations) to fund other things.
i always wonder how the bridge in Dearborn, Michigan fell on a school bus and how my suspension got wrecked in my LeSabre in the winter time
I drove through Indiana from Memphis, to Indianapolis, through Stuben County, and even a wee bit into Michigan and I thought the roads were loads better than Central New York. What perplexed me is that Indiana feels it necessary to pave every road, even rural backroads. In fact, I drove on several dirt roads in Michigan just over the border that were not paved.
Hell, in SE MI we have suburban roads that aren’t paved. Sort of shocks you when you’re cruising along and the road turns into a dirt road. You make a mental note to avoid that one, which is why the locals don’t want them paved; it keeps the riffraff out.
We do have sales tax on motor vehicles, the rate varies county to county. Here in Cuyahoga County (county seat Cleveland) we have the highest sales tax rate in the state, 7.75%. When combined with our very low yearly registration costs it isn’t a bad deal at all.
Yes.
Similar to California. Each year one has a car registration to pay which happens to fall due on the day the car was first registered. Fee based on the selling price of the car and decreases over the years. Pickups, like my F100, are classified commercial so they pay a slightly higher fee. After you pay you receive your new license tag to stick on your plate in the upper right corner denoting the year. Given the amount of older cars I have I can tell that there does seem to be a floor in California. None of the older cars have gone below $80.
I don’t remember the date, but I remember when California went to a sequential year system, vs the calendar year. Used to be that everybody’s registration came due on Dec 31. Eventually there were just too many cars in the state for that to work.
Kali is just murder on older 3/4 and 1 ton PUs. You can spend $300-400+ for a 15yr old 1ton.
NZ has the tax label/rego the roadworty label/WOF and for diesels and HGV the RUC label, WOF is renewable every 6 months rego can be done quarterly and RUC must be paid in advance of mileage. And the police have just introduce plate recognition tech to help them catch offenders(bastards).
Here’s hoping some one will be making and selling blank vintage Tax Discs for the old British Vehicles folks like to collect .
-Nate
They’re easily available if you’re into vintage British motorcycles. I’ve been so used to seeing them on vintage cafe’ racers that it struck me as odd to see one in the windshield of a car.
I love Ohio… maybe the cheapest state to register a vehicle. No property taxes on them, a steaming pile of BS if there ever was one. A new sticker for the Crown Vic is $41.00, and for my Harley it’s a whopping $29.00. Not a bad deal at all. And, for the counties were it’s mandated, the bi-yearly eChecks are free of charge. Not a bad gig.
Here in Queensland we pay an annual registration fee. I WISH all the revenue went on roads.
The fees vary with the number of cylinders a car has. My V8 Skylark costs a grand a year.
Since its worked on cylinder count a Daimler 2.5 V8 cost more to register than a 2.6 litre 4 banger. Not a common example I grant you.
Just got rid of rego stickers on the windscreen. For the last decade they have carried
government propaganda, which I cover with my own message about greed ( not speed)
cameras.
NSW is worse they go on weight my EH 179 trimatic was about $30 cheaper than my VH Commodore 3.3 trimatic but the newer easy peel rego stickers introduced in the 90s meant I only regoed one and just moved the plates and sticker around, never got catched either.
Sweet! I have an uncle who once swapped swapped an engine & the plates
rego sticker between a write off MG and one he wanted to register.
Since the only ID specific to that car was the engine number it was an easy out.
That would include the compulsory 3rd party injury insurance though wouldn’t it? It does here in Victoria, where the registration fee is standardised and the TAC (Transport Accident Commission) insurance varies whether you are in the capital city metro area or outside it. Total is $760 in the metro area.
There is also stamp duty (tax) paid to the State govt when you purchase a vehicle in addition to GST to the Fed govt. Advertised prices for cars must include these so the $Amount is all-inclusive, drive away. This doesn’t apply to private sellers, but the 4% stamp duty still applies.
We have also deleted registration stickers this year so it makes it hard to tell if a car is registered or not, which is important when it is the driver who will be charged with driving a borrowed, unregistered vehicle. Ironically the system for historic vehicles which operates separately has recently introduced stickers in addition to logbooks (permitting 90 days’ use a year).
Trucks still keep the rego sticker here in VIC.
I won’t peel off mine when it expires.
Missouri has the dreaded personal property tax as well. My old 1993 subaru was assessed at $13/year so we were quite surprised with the $800 yearly fee when we bought a new car in 2008! We will never make that mistake again. Used cars are the way to go out here.
Of course we have the annual (or biannual) safety/emissions testing fee, registration fee, and couple that with fuel taxes which range (according to who you talk to) from 50 cents to a dollar or more per gallon, and normal state and federal taxes… But yet we still are unable to keep up with our road maintenance!
My personal opinion is that “road tax” should be simified. Remove the personal property tax, the fuel tax etc.
Instead issue a true road tax based on vehicle weight as that makes most sense to me as a direct indicator of direct road damage potential. But the trucking companies will fight that, even though they would pass those costs to consumers anyway.
I don’t know, I was greatly impressed with the quality of the roads in SW Missouri when I met my (then) wife. My Father in law used to regularly remind me that they knew how to build roads. It only got worse when he moved here to New Hampshire and he was exposed to some of the bombed out messes we have here.
Wow, I guess Wisconsin is relatively cheap. We pay sales tax on the purchase (varies by county; Kenosha County is 5.5 percent). Yearly sticker for a car is $75.00. Trucks are graduated by GVW; a typical half-ton pickup costs about the same as a car. That’s it, plus no annual inspections. We do have emissions testing bi-yearly for OBDII cars (roughly newer than 1996).
This is a great article that explains your system very well. Thanks!
Here in Curbsidelandia we have everyone beat: No sales tax, on anything. Annual registration is $46.00. No safety or smog inspections. Helps to explain all the old CCs still on the road here….
Michigan has no BS either, just exorbitantly high insurance rates and roads which haven’t been fixed in 50 years. Act like mad max, as your road will look straight out of it!
I’m amazed the peasants don’t pick up torches and pitchforks and march on Lansing to demand they find some money to fix the effing roads here.
Michigan registration/plate fees are kind of weird though.
For most cars, the annual fee is based on the original value, so even if they are both cheap used cars, plates for a Lincoln Town Car would be more than plates for an Ford Escort.
On the other hand, if the car is old enough, the fees are based on weight classes.
So my ’65 Chrysler is about $10 more a year than my ’74 Dart was, and the ’95 Olds is almost twice as much even though my purchase price was nearly identical for each.
I’ve never figured out the formula used by the Secretary of State in MI, either. I figure, the bill comes in December, I pay it, get my sticker in January and put it on the plate.
Like Dan said, it’s based solely on the original MSRP, not adjusted for depreciation. If you look at the “registration class” on the slip in your glovebox, it’ll show a two-digit number such as “18”. This means the original MSRP was $18,XXX when the car was sold new.
A very simple system, but pretty weird, because older luxury cars cost two or three times as much to register than a brand new cheap car. My 2014 Jetta is cheaper to register than my 10-year-old Park Avenue was, because the Buick cost almost twice as much new (Class 33, meaning it cost $33,000 new) even though I only paid like $7000 for it used. The $17,000 Jetta is about half as much to register because it’s only Class 17.
I’d hate to see what something like a 15-year-old BMW 7-series would cost to register in MI…
Road tax is paid in accordance with car hp and emissions here in Austria; this is something you do over your insurance. There’s a sticker for your yearly roadworthiness test as well as one for Autobahn fees (if you want to drive on it) and, in Vienna, another one for parking tax (if the quarter where you live charges for resident parking). Can all come to about €1500 per year if you have a higher hp vehicle… But you can use one licence plate for 3 vehicles (obviously, not at the same time) provided you pay tax for the highest hp vehicle. The secret is to buy something with low hp for everyday and then a vintage vehicle (older than 30 years) for fun. Given that insurance for the vintage vehicle is very low and that many curbside classics from the 70s had low hp figures, it makes sense. Of course, a lot of these vehicles (particularly the US-made ones) could be easily modified to release their latent hp once the emission junk is thrown away:)
Thank you for the information about the British ‘tax disc’, I often wonderd what that was all about.
Interesting to read about car registrations and costs from various places.
In Slovenia, a car must be registered once a year. Registration papers (to be carried in the car or with the owner together with his drivers license; no window stickers, thankfully) are given after you pay the money (of course) and is calculated thusly:
– mandatory insurance (liability insurance) which you pay to the insurance company of your choice; the sum to be payed is based on the kilowatt power rating of the vehicle’s engine and then further modified by the owner’s/driver’s “bonus points” (basically, every year you have not caused an accident, your insurance rate goes down and vice versa)
– an additional road tax which is based on the engine’s displacement and is highly progressive, with highest rate (565 EUR=710 USD) for engines with displacement at or above 4000 ccm (4 liter)
rego is 700 bucks in Victoria now 🙁 thanks Labor!!
YIKES!!!
Here’s a peculiar tax disc thing: my dad fitted a new tax disc to his Rover 2000 in June 1972, with the new disc running from then until October 1972 (four months). It was a big enough occasion that we photographed it:
http://www.flickr.com/photos/anachrocomputer/2152013254
Or maybe we just wanted to use up the last shot on the roll of slide film! Either way, does anyone know why the disc was just four months, and not six or twelve?
Perhaps, due to build quality of 70s British cars, they didn’t expect the car to last much longer?
(sorry, couldn’t resist 🙂
Is this what is referred to as MOT?
I think MOT is the safety inspection.
Yes, MOT is the “Ministry of Transport” safety inspection – also required annually for vehicles more than 3 years old and built after 1960. It’s separate from the tax.
The dutch system is much, much more complicated.
Diesel powered vehicles, except commercial ones are taxed more heavily then ptrol ones.
Our taxes were always based on the weight of the car, not the powerrrrrr.
Now of course they invented a Co2 penalty.
But the best was that the Dutch made a real socialist work creator out of the system, in the old days they had a fleet of cars sitting alongside the road taking pictures of licence plates of each car that passed, this was sent to an office where civil servants would check if road taks was paid.
Of course there were two guys in each car, I mean why take one?
Today big brother is watching us contstantly by intelligant camera’s that read your licence plates and computers that check if you plate corresponds with the vehicle, if you are insured and if road taxes are paid and if your MOT is valid.
Of course, this is Holland, we want to be better then the Germans !
The downside is that all money that comes in from the roadtaxes is not spent on roads or infrastructure, well a fraction is.
It is spent to keep the less fortunate people alive, sponsor trains and other public transport.
If it would be spent on roads,, we’d have hand carve marble roadsurfaces with roadsigns sitting on platinum golden posts !
However, the oddest thing about road tax is the fact you still have to pay when you wish to park yhour car in an urban area.
Nobody has ever been able to explain this to me, but if I pay roadtax I believe I have the RIGHT to park for free.
And besides this, with the whole Eurofication in Europe, each and every EU member state are now introducing fees you have to pay on “foreign ” roads, so in ten years time each european car will have a small gap to see through the windshield while the rest will be shattered with toll-boxes and stickers.
To point out how ridiculous are EU “system” is : The EU gave large summs of money for improvement of the infra structure in former Eastern block countries, they built new motorways and let us by a sticker to drive on them…….
Because of CC I know what this article is talking about:
DVLA tax disc renewal website buckles under pressure of high demand
In the UK vehicles over 40 years old are exempt from the annual safety and emissions inspection (MOT), and don’t pay any road tax either. So I pay just £100 a year insurance to drive my Mercedes 250 W114.