Vehicle Tax Query

Darenth87

The annual reminder arrived today and this got me pondering. Is the DVLA actually permitted to charge credit when paying road fund licence over 6 or 12 months? Is it actually "credit" in the true sense and subject to certain legal requirements?

Maybe the DVLA would argue that the price of the road tax is the higher of the 2 figures and the lower figure is essentially them allowing you the kindness of a "discount" for paying in advance as a lump sum.

Be interesting to hear others views on this. If I am right and its a case of them making money on the higher rate from those who choose to spread the cost they must make a fortune in the extra direct debit charges.

My view is that as the tax runs month to month youre not really paying by credit apart from the 30 odd days ahead of you each month. It might not amount to much money but I would still be interested to know the lie of the land on this. The monthly payment on the reminder is also worded thus "monthly payment of approximately". Should it not state the exact monthly amount?

Apologies if this topic has been covered before.

mcpitman

Is it relevant? Buying 2x 6 months tax has worked out more expensive than 1x 12 months tax for as long as i can remember.

droopsnoot

Darenth87 wrote: »

Is the DVLA actually permitted to charge credit when paying road fund licence over 6 or 12 months? Is it actually "credit" in the true sense and subject to certain legal requirements?

You can be reasonably sure that, if they are making a credit charge, then they will have secured the appropriate permission to do so, and they will almost certainly meet the legal requirements.


In the days before direct-debit monthly payments, the cost of a six month tax disc was slightly higher than half that of a twelve month disc, and that was considered to be a discount on the longer period. If you sent a 6-month disc in for a partial refund of, say, five months, you'd get 5/12 of the 12-month price, not 5/6 of the 6-month price.


Don't forget they'll pay charges on direct debits as well, so some of the additional cost will be to cover that.


I suspect the "approximate" pricing per month is so that they don't have to specify whether it's per calendar month or per 12th of the year, and then be asked why VED for February isn't cheaper than VED for, say, July. It's just to save writing a load of detailed stuff out.

EssexExile

Why wouldn't they be permitted to charge more if you are making more payments?

Car_54

droopsnoot wrote: »

In the days before direct-debit monthly payments, the cost of a six month tax disc was slightly higher than half that of a twelve month disc, and that was considered to be a discount on the longer period.

The last time I could be bothered to do the calculation, the difference between the 6- and 12- month price was equivalent to an APR of just over 50%. So, a wee bit more than "slightly";).

TooManyPoints

The six-monthly tax rate has always been more expensive than half of the twelve month rate. It has nothing to do with credit.

Car_54

TooManyPoints wrote: »

The six-monthly tax rate has always been more expensive than half of the twelve month rate. It has nothing to do with credit.

The government allow you to pay in (two) instalments. This impairs their cashflow, so they charge a premium to compensate. In what way does that differ from any other credit arrangement?

iolanthe07

There are higher costs involved for the DVLA to set up direct debit mandates, so they charge more. Best to pay a year in advance with a debit card on line. Shorter periods of VED have always cost more, right back to the days when the only alternative to paying annually was four-monthly and VED was administered by the Post Office and driving licences by County Councils.

foxy-stoat

[quote=[Deleted User];76266153]The last time I could be bothered to do the calculation, the difference between the 6- and 12- month price was equivalent to an APR of just over 50%. So, a wee bit more than "slightly";).[/QUOTE]

For me it would be 9.2% APR if I wanted to pay over 12 months.

£125 annual or £131.23 by 12 payments by direct debit.

facade

If you buy 6 months tax outright, there is a 10% extra charge.


Direct debit in instalments is "only" 5%


Always buy 12 months in one go. If you only want 6 (for a "Summer" vehicle), declare SORN during office hours on the last day of the 6th month and get the other 6 refunded.

Car_54

facade wrote: »

If you buy 6 months tax outright, there is a 10% extra charge.

That seems innocuous, until you work out the APR as 49% ...