VAT is the consumption tax that the government charges on most goods and services, which includes cars and other motor vehicles that use the UK roads. However, there can be some confusion on whether road tax has VAT applied or if it’s exempt.
Here’s the simple answer to whether UK road tax has VAT:
No, there is no VAT on road tax in the UK. Road tax, also known as vehicle excise duty (VED), is not subject to VAT. The tax is charged to the owners of vehicles that are used on or parked on public roads.
UK road tax must be paid annually or every six months, with the tax rates set by the government. How much road tax you pay will depend on several factors, including your vehicle’s CO2 emissions, fuel type, and date of registration.
But that doesn’t mean other motoring expenses are not liable for VAT. For example, VAT will still be charged on fuel, repairs, and maintenance, as well as when you buy a new car. Small businesses that are VAT-registered may be able to claim back the VAT paid on these expenses (subject to certain conditions).
Is road tax exempt from VAT?
So, yes, road tax is exempt from VAT. It’s exempt because it’s considered to be a form of direct taxation on your ownership of the vehicle, instead of being a value added tax levied on services or goods.
Who is exempt from road tax?
Whilst there is no VAT on road tax, there are some exemptions on who must pay it. For example, electric vehicles are exempt from paying road tax, the reason being due to them being more environmentally friendly.
Is there VAT on an MOT?
No, there is no VAT on the cost of an MOT. The government has set a maximum amount that garages can charge vehicle owners for MOTs. The maximum fee for a car is £54.85 and £29.65 for a standard motorcycle. There is no VAT to pay on the MOT fee.
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Below you can browse more motoring related questions from the Small Business Owner Advice website.
- Understanding capital allowances on electric cars
- Can you claim VAT on leased cars?
- The question of avoiding tax on company cars
Jon has been in business since 1999, and in that time worked with more than 300 small business clients. As well as being an accountant, he is also an early adopter of tech, and has helped small businesses to leverage the power of their computer systems by creating software to automate and simplify accounting tasks.
