Road Tax - What exactly is it used for?

Here at Amber Car Leasing we often hear the cry ‘what exactly does my road tax pay for?’ So, we have pulled together all of the information we have on it to set the record straight once and for all.

What is road tax?

Road tax, also known as road fund licence, vehicle tax and car tax, is a taxation set by the UK Government and enforced by the DVLA and which is payable on any roadworthy vehicle. It is based on the amount of carbon emissions the vehicle emits. It came into force in 1888 – when there were not many cars around – and had a big overhaul in the 1920s when cars were becoming more and more popular.

Who does my road tax money go to?

Most people believe that the money from their road tax goes to the Department of Transport or their local council – but this isn’t the case. The money actually goes to the Chancellor of the Exchequer, the same way that any other tax you pay goes. Some of it may end up with the Department of Transport eventually, as they are allocated a budget from the Government each year – but the money does not go straight to them from the DVLA.

What is road tax used to pay for?

As a company who offer we think that the term ‘road tax’ is a little misleading as some people believe it is a tax that pays for roads. Actually, it should be known as vehicle tax as it has nothing to do with roads at all.

In fact, because your road tax ends up with the Chancellor of the Exchequer it is hard to say exactly what it is used for, as it just ends up in one big pot with all the other taxes. However, we can break it down into what tax income may be used for on a national and local level:

On a national level, our tax helps to pay for the transport infrastructure – or motorways. Our roads need constant maintenance in order to keep us running smoothly. The Department for Transport, therefore, is allocated a budget from the Government which they use to improve our infrastructure – by introducing smart motorways and so on.

Local projects may also get some money as well, such as new road layouts or filling in potholes. These projects are decided by the local council, and will use a budget that was given to them by the Chancellor of the Exchequer ultimately (although it will come through a couple of other people in between).

Hopefully this has cleared up some of the questions you had about road tax, what it is and where the money goes.

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