Road tax, or Vehicle Excise Duty (VED) is an annual fee that drivers in the UK must pay to drive on public roads. It's a relatively unknown fact that you can actually receive a car tax refund in certain situations.
You can cancel car tax by notifying the DVLA, there are a number of reasons that could entitle you to a refund. Read on to see if you might be eligible to reclaim car tax.
What is car tax?
If you own and drive a car in the UK, the likelihood is you pay road tax, also known as car tax or VED. It's an annual tax collected by the DVLA and used by the government in part to improve transport infrastructure and other traffic projects. You can find out whether your car is taxed by using our car tax tool.
You could be entitled to a car tax refund if you cancel for specific reasons. Typically this is due to the car no longer being in your possession, but more on that later.
Exactly what you pay towards road tax can depend on various factors such as the tax band of your car, the fuel type of your car, its age and value. Paying road tax is a legal requirement, not doing so can have consequences. If you're caught, you could be issued with fines up to £1,000 and your car could be clamped or impounded.
Some vehicles are exempt from paying road tax, including disabled passenger vehicles, some vehicles made before January 1st 1984, certain electric vehicles, and those that have registered a Statutory Off Road Notification (SORN). Here is a full list of vehicles exempt from tax providided by gov.uk.
Just remember, even if you're exempt from paying, you still need to tax your car!
How do I cancel my car tax?
To cancel your car tax, you'll need to contact the DVLA and inform them of the reason you're cancelling. If the reason you're cancelling is because you've sold your car, for example, you must inform the DVLA of the change in ownership before cancelling your tax.
You can contact the DVLA by phone, webchat, email, or by post. Waiting times vary depending on how you contacted the DVLA.
Am I eligible for a car tax refund?
In most of the cases below, you'll need to notify the DVLA to help your tax refund go through. Here are a few examples of where you may be eligble for a car tax refund:
- Your car is sold or transferred to someone else
- Your car is written off by an insurance company
- You have registered your vehicle as off the road known as a Statutory Off Road Notification (SORN)
- You have scrapped the vehicle at a scrapyard
- Your car has been exported out of the UK
- A change in your circumstances leads to exemption from road tax
- You car has been stolen, but you need to tell the DVLA that you no longer own the vehicle.
If none of the above reasons apply to you, you probably can't cancel your road tax and get a refund. But you can query this by contacting the DVLA.
How do I get a car tax refund?
If you're entitled to a car tax refund, and you've followed the correct process through the DVLA, it'll be processed automatically. You should receive a refund cheque in the post. It's sent to the address corresponding to the vehicle's log book so make sure you check this.
For direct debit payments, the DVLA cancels these automatically. You can pay monthly or every six months. You should be refunded any extra months you'd paid for already.
If you pay upfront, the DVLA will process a cheque refunding you an amount based on the full months of tax you had already paid for.
How much of a road tax refund will I get?
It's a fairly straightforward calculation based on the number of full months you have already paid for from when the DVLA receives your cancellation request.
So, for example, let's say you sell your car just over three months before your annual car tax renewal. As long as the DVLA receives your request with 3 months left on your car tax, you'll be refunded for 3 full months.
How long will a DVLA tax refund take?
Typically, your refunded car tax should arrive within 6 to 8 weeks. If you haven't received a cheque after 8 weeks, you should contact the DVLA.
If for whatever reason the cheque contains errors, including your name, you should return it by post and contact the DVLA.
What happens to my car insurance if I sell my car?
That depends on your circumstances. If you're selling your car and not getting another one, you can cancel your car insurance policy by contacting your provider. You may be entitled to a partial refund depending on your policy, but it's likely you'll have to pay a cancellation fee. Every policy is different, so you should contact your insurer to find out more.
If you're selling your car, but replacing it with another, you may not need to cancel your policy altogether. You could update your policy by contacting your insurer to cover your new car.
Adding a new car to your existing policy may not necessarily be the cheapest option available to you. You'll have to assess your options, this includes comparing car insurance quotes for your new car. Luckily, we can help with that!
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