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Do You Pay Taxes on a Leased Car?

Leasing has hit a trend these days for its convenient methods and agreement. People who never thought of having a car or a vehicle can now afford to lease one right out of the brand new deal. There are over many advantages of leasing vehicles and the agreement is simple to cope with. There are a few things for you to keep in mind. The following detail on leasing shall assist you.

What is leasing?

Leasing is a legal contract in renting a car on low monthly payments for a brand new vehicle, in most cases. You can get the latest vehicle without the hassle of loans and second-hand purchases of car models you are not interested in. Leasing in general is driving a car without owning it. The owner does everything for it. The manufacturer does the services and management of the car. The finance company may or may not pay the tax on that leased car. Cheap car leasing deals UK is affordable online once you are sure what vehicle you require. There are certain legal charges on every car, whether cheap or expensive. That is a car tax.

Why is Car Tax Important?

The Drivers and Vehicle Licensing Agency checks the validity of the MOT test (the three-year loop of car’s roadworthiness certificate) and insurance, in the United Kingdom. It is a legal requirement.

The Tax on your Leased Car and the Two Situations

There can be two situations regarding the state and country you live in. In most states, there is no need of paying car tax on your leased car. The agreement is simply for the lease of the vehicle without charging anything extra from the person. The additional payments, penalties or service charges would be valid if you delay in giving the leased car back. Other than that, you need not pay anything extra.

In some states like the UK, the tax deducts from your lease payment. The amount you and the car dealer shake on also includes the tax payment. You will pay for your car tax in the monthly lease payment. This is an automatic deduction, but it is necessary. When you do not have the excessive management authority on your leased car, then paying the car tax for the drive becomes somewhat affordable. It might be €40 to €50 extra charge per month.

Giving Half Sales Tax on your Leased Car

Simply reduces the upfront value of the car. You would not have to pay a full tax on the leased car, rather just the half amount of sales tax. However, if you have agreed to purchase the car at the end of the lease, then you will own the car legally. You need to pay a full tax on the vehicle later on.

Such vehicles and cars do not belong to the person who is leasing, but to the finance company directly. They make sure to deduct sales tax from the monthly lease payment, and you are good to go.

This was all about car tax and their relationship with the leasing agreement.


Aaron Swift is an intelligent and analytical worker. His extensive experience in the field of Stucco Mason and plastering has made him an expert in his field. He also has excellent abilities to read and deduce architect drawings and blueprints. Currently, he works in Ride Leasing, UK.

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