Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential merits of removing the surcharge for paying Vehicle Excise Duty in instalments for people with below average incomes.

In Autumn 2013, the Government announced the introduction of the Vehicle Excise Duty (VED) direct debit scheme from 1 October 2014. Instead of paying VED annually or in two instalments per year with a 10% surcharge, this allows people to pay VED monthly or in two instalments per year via direct debit, with a 5% surcharge. This change therefore reduced the surcharge payable by half.

These surcharges are in place to make up for the interest that the government loses on monthly and six monthly VED payments. When the VED direct debit scheme was announced in 2013, a Tax Information and Impact Note was published setting out the expected impacts on individuals. It was expected that the direct debit scheme would have a positive impact for individuals, as it would enable the spreading of VED payments at a lower surcharge rate than non-direct debit instalments, and help individuals and families plan manage their finances.

The Tax Information and Impact Note also set out expected economic, equalities and other impacts of the changes, which can be found here: https://assets.publishing.service.gov.uk/media/5a74c63ce5274a3f93b48b3e/vehicle-excise-dd.pdf

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