Taxing a Leased Vehicle

Here at Nationwide Vehicle Contracts, one question we are often asked by customers relates to road tax. Many customers are often confused as to whose responsibility it is to tax a car lease and whether the cost is included in the monthly payments.

To help answer this query, Nationwide Vehicle Contracts has put a short guide to explain the process involved in taxing a leased vehicle.

What is road tax and what does it pay for?

Vehicle Excise Duty (also known as vehicle tax, car tax or road tax) is a periodic 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 is currently based on CO2 emissions, though in the past ratings have been 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.

Contrary to popular belief, only a small proportion of Vehicle Excise Duty (VED) is actually spent on improving national and local roads, with the vast majority going into a central fund which covers everything from healthcare to education. In 2009, VED raised £5.63 billion. In the 2015 budget, the government announced that from 2020 the revenue would be ring-fenced for expenditure on the strategic road network.

Is road tax included with a lease agreement?

All car lease special offers with Nationwide Vehicle Contracts 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 funder will provide vehicle tax for the duration of the agreement, as they will remain the registered owner of the vehicle. NB: If the cost of the vehicle tax goes up during the term of the agreement, or any extended term, the customer will be liable to pay the amount of the increase.

For finance lease agreements, the finance provider will typically only provide tax for 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.

It’s worth noting that from October 2014, paper tax discs are 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 funders.

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.

In order to do this, you will need:

• 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.

Have another question relating to taxing a lease vehicle? Call Nationwide Vehicle Contracts on 0345 811 9595 and we'll be happy to help.