Top News

Research has exposed that 2.9 million British motorists are unnecessarily overpaying the DVLA for their Vehicle Excise Duty, commonly known as car tax, through ignorance of a 5% premium added to their payments. This supplementary expense affects drivers who choose to divide their car tax payments into monthly direct debit instalments, causing them to pay more in total.

The investigation, published by Go.Compare Car Insurance this time last year, discovered that nearly two-fifths (39%) of motorists were completely unaware of the supplementary charge linked to this payment approach. Among all vehicle owners settling their car tax through monthly instalments, approximately 5.6 million were oblivious to the additional levy incorporated into their tax.

The 5% premium can rapidly mount up for those selecting this payment route. Collectively, British drivers unknowingly contribute an additional £56.3 million each year.

Nearly half (49%) of these motorists admitted they would switch their payment approach if they knew about the premium. As a result, 2.9 million drivers have paid more than required through lack of knowledge regarding the 5% supplementary charge, representing a potential saving of £27.5 million, according to the research team's calculations.

To demonstrate the consequences, Go.Compare outlined that a vehicle owner settling £1,000 yearly in car tax through monthly instalments would face an additional £50 annually in premiums. Across a five-year timeframe, this represents a loss of £250 on avoidable charges.

Those facing steeper vehicle tax bills could be wasting even more money. Drivers opting for the more convenient monthly or six-monthly vehicle tax payment schemes are unwittingly paying additional costs due to an automatic surcharge, research has shown. The extra charge isn't applied to one-off annual payments, going unnoticed by motorists using instalment plans.

Despite this unnecessary expense, the convenience of direct debit means numerous drivers choose it over single payments. Nevertheless, for those able to manage it, settling the annual amount in one go can avoid these additional charges - without needing to change vehicles, adjust mileage, or move tax bands.

Tom Banks from Go.Compare, a car insurance expert, said: "Setting up a direct debit is an easy way to pay for your yearly car tax, but many drivers don't realise they're forking out extra for that convenience. For some vehicle owners, paying monthly also makes the most sense as it allows you to spread the cost, but those who can afford to pay in full should consider switching to a one-off annual payment to save on the surcharge.

Even if monthly instalments are the best option for your budget, it's important to know exactly what you're paying - and how much more it's costing you over time. Checking your payment method before your next renewal could be a simple way to avoid unnecessary costs and make sure you're getting the best deal. While it's not possible to reclaim past surcharges you've paid, you can avoid any future added fees by switching to a single annual payment when your next renewal is due.

The proportion of individuals unaware of the surcharge was calculated from a YouGov poll of 2,000 UK adults. The research took place on December 19, 2024, with all respondents selected at random.

The 5% monthly direct debit surcharge was calculated using the standard rate for vehicles registered from 01/04/17 onwards, according to DVLA figures. This sum was divided by 12 to establish the additional cost for one month (£15.83).

This amount was subsequently multiplied by the share of vehicle owners paying via this method who remained unaware of the surcharge (39.08%). It was then multiplied by the proportion of motorists who stated they would change their payment approach if informed of the surcharge, based on the survey mentioned above.