Car Tax Rules and Regulations

If you own a registered vehicle, you are legally obliged to pay car tax. Failure to do this will result in a financial penalty or possible prosecution. This article offers advice on paying car tax on both your own car and a company car, as well as briefly discussing the government's new car tax rules (which will come into play from 2010).
Getting your car tax disc
You can pay your car tax online, over the phone or at certain Post Office branches. Whichever method you choose, you will need the following:
Your V11 reminder (this is sent around three weeks before your car tax is due to be renewed)
Your V10 Vehicle License application form
Your Vehicle Registration Certificate (if using a V10 form)
Your V62 application for a Vehicle Registration Certificate V5C (if you don't have a Vehicle Registration Certificate)
Your MOT test certificate (for cars aged three years and over)
Third party insurance
Payment
Displaying your car tax disc
You need to display your car tax disc in a prominent position in your car to prove that you have paid it. You should display it in passenger side of the front window screen.
Renewing your car disc
You can renew your car disc from the 15th day of the month on which it becomes due. To pay your car tax disc in the first instance, you can do this from the first of the month.
Failing to pay your car tax

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If you do not pay your car tax on time, you will be fined. This is £80, but this will be reduced to £40 if you pay the fine within 28 days. Persistent offenders can be fined £1000 and prosecuted. It is now even easier for the DVLA (Drivers and Vehicle Licensing Agency) to track down tax dodgers, as it will show up on their computer system if a registered vehicle has not had its tax paid or renewed.
Changing your details
If you sell or scrap your car, it is your responsibility to inform the DVLA that you are no longer the registered owner of the car. If you fail to do this, you will still be liable for tax on the vehicle, even if you are no longer driving it. Likewise, you need to tell the DVLA if your name or address changes, so that your V11 reminder form can be sent to you on time.
Paying tax on company cars
If you are given a company car for your work, you still need to pay tax on it. The amount of tax is dependent on the list price of the car (and its accessories), its C02 emissions, and the type of fuel that it uses. Other factors can include any capital contributions (a lump sum to use the car), any regular payments towards the private use of the car, and whether it is available throughout the full tax year. The typical tax cost is between 15 and 35 per cent of the list price, minus reductions if you use alternative types of fuel.
If you only use the car to commute to and from work, you do not have to pay tax on it. However, you need to be able to prove to HMRC that you do not use the car for private use. You can do this using documents proving mileage use, or have it written into a signed agreement or employment contract. These will need to be shown to HMRC by you or your employer.
The new car tax rules
If your vehicle was registered between March 2001 and March 2006, you currently pay a maximum of £210 per year in tax. The amount that you pay is determined by the size of your car's engine. However, from April 2010, this will change dramatically, as the amount of tax that you need to pay will be decided by your car's C02 emissions. The biggest offenders of C02 emissions will have to pay up to £455 per year. This is designed to encourage drivers to switch to cars that are more environmentally friendly, such as the new hybrid cars. For cars that were registered before 2001, it is still engine size that determines tax.