£94m lost following discontinuation of car tax discs

The abolition of tax discs has led to soaring numbers of unlicensed vehicles and an unpaid tax bill of £94 million, as reported in the DfT’s 2019 survey on Vehicle Excise Duty evasion.

Ministers had hoped to be able to save £10 million a year by clamping down on tax evasion and cutting costs when it replaced paper discs with an online system in 2014.

However, the move has backfired as figures have revealed that a large number of motorists are either deliberately dodging tax or are forgetting to pay it, although a proportion of the estimated £94m revenue shortfall will have been recovered by DVLA enforcement activity and the payment of arrears by vehicle owners.

Around 1.6 per cent of vehicles on Britain’s roads are currently evading Vehicle Excise Duty (VED), according to the Dept. for Transport. This represents an estimated 634,000 vehicles, almost treble the number in 2013/14, and equates to a loss of around £94 million in unpaid tax bills.

This is far more than the £35 million lost under the old system five years ago. While the number of vehicles avoiding tax is down from 1.9 per cent since 2017, it still remains higher than the 0.6 per cent rate before paper discs were abolished.

Previously, any remaining tax on a vehicle was transferred to the new owner when it was sold. Under the new system, any existing tax ends when a vehicle changes hands and the previous keeper is automatically refunded the remaining tax. The new owner must tax the vehicle immediately and is reminded by email to do so. But government figures suggest many motorists are failing to do this.

The vehicles most commonly dodging VED are motorcycles with an evasion rate of 3.8 per cent. More than half of vehicles showing as not having tax have been unlicensed for more than a year, but of this proportion more than a quarter were motorcycles.

No comments have been made by the DfT due to the period of “purdah” prior to the General Election.