The Comptroller and Auditor General (C&AG) has published his
annual report on how DVLA collects Vehicle Excise Duty
(VED).1
Background:
- VED revenue rose to £8.4 billion in 2024-25, a 7%
increase from the previous year.
- DVLA also collected £110 million in fines and penalties, up
from £100 million in 2023-24.
- Zero-emission vehicles became liable for VED from 1 April
2025.
Two new areas reviewed:
- DVLA's 2022-2025 compliance and enforcement strategy and
planning for its next one for 2025-2028.
- DVLA's preparation for ending VED exemptions for
zero-emission vehicles from 1 April 2025.
Key findings:
- The report concludes that DVLA's VED collection systems are
functioning well, but it could have done more to anticipate the
public response to the new VED rates – insight that could have
helped inform HM Treasury decisions over policy implementation.
- DVLA lacks an up-to-date estimate on how much VED is being
lost due to non-compliance – either deliberately or through error
– and does not have a full understanding of whether its
compliance and enforcement actions are cost-effective.
- Under its 2022-2025 strategy, DVLA aimed to keep compliance
high by supporting drivers, using data better and targeting
evasion. By March 2025, 30 of 32 actions from the strategy were
completed; the rest are in progress. However, internal data
suggests compliance stayed stable, but DVLA cannot say how much
each action helped.
- Nearly a quarter (309,000) of zero-emission vehicle owners
renewed early to avoid new VED charges from April 2025. This
caused a 1,400% spike in early renewals and DVLA estimates
this could have cost £30 million in lost VED revenue.
“I found that DVLA did not fully set out the risks of the
likelihood and extent of the impact of behavioural change in
response to the new VED rates for HM Treasury to consider as part
of its forecasts and decision that no preventative action needed
to take place.” – , C&AG of the
NAO
The C&AG recommends:
For DVLA and the Department for Transport (DfT)
- Develop a long-term method to estimate the cost of VED
non-compliance, and use this to make best use of resources and
show Parliament how much revenue is lost each year.
For DVLA
- Until a long-term solution is put in place, use existing data
to give the best possible estimate of VED non-compliance costs
next year.
- To progress into its next compliance and enforcement
strategy, review how well the 2022-2025 strategy worked and use
the findings to shape future plans.
- Investigate trends like the rise in SORN vehicles to
understand impacts on VED revenue.
- Collect cost data to assess whether its compliance and
enforcement activities are cost-effective.
- Look at new ways to improve compliance and enforcement,
including using technology and learning from others in government
and the private sector.
ENDS
Notes to editors
- The Comptroller and Auditor General's Section 2 Report in the
DVLA accounts 2024-25 can be accessed here (pages 110 to 126):
DVLA Annual Report and
Accounts 2024-25
