Question to the HM Treasury:

To ask the Chancellor of the Exchequer, for what reason there is a surcharge on vehicle tax payments on periods shorter than a year.

Vehicle Excise Duty (VED) can be paid annually, or in monthly or 6-monthly instalments. Revenue from motoring taxes helps to fund vital public services and infrastructure, including investment in roads and transport.

The cost to the exchequer is higher when VED is paid monthly or six-monthly, rather than annually, because of lost interest. To reflect this impact on the public finances, monthly and six-monthly payments for vehicle licences include an extra charge to make up for the lost interest.

A six-monthly vehicle licence paid by direct debit is set at 52.5 per cent of the annual rate, and a six-monthly vehicle licence paid by non-direct debit is set at 55 per cent of the annual rate. A monthly vehicle licence paid by direct debit is set at 105 per cent of the annual rate.

As with all taxes, the Government welcomes representations on how the tax system can be improved. The Chancellor makes decisions on tax policy at fiscal events in the context of public finances.