A study found many weren’t aware
A study has found that 2.9 million British motorists are paying the DVLA more than they need to for their Vehicle Excise Duty, or car tax, because they’re unaware of a 5% surcharge added to their payments. This extra cost affects drivers who choose to split their car tax payments into monthly direct debit instalments, meaning they end up paying more in total.
The research, published by Go.Compare Car Insurance this time last year, discovered that nearly two-fifths (39%) of motorists had no idea about the additional charge linked to this payment option. Of all vehicle owners paying their car tax monthly, an estimated 5.6 million didn’t realise there was an added fee included in their tax bill.
The 5% surcharge can rapidly mount up for those using this payment method. Collectively, British drivers unknowingly fork out 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 surcharge. As a result, 2.9 million drivers have paid more than they should have due to being unaware of the 5% extra fee, representing a potential saving of £27.5 million, according to the research team’s calculations.
To demonstrate the impact, Go.Compare highlighted that a vehicle owner paying £1,000 per year in car tax through monthly instalments would face an extra £50 annually in surcharges. Over five years, this adds up to £250 wasted on avoidable fees.
Those facing steeper vehicle tax bills could be wasting even more cash. Drivers opting for the more convenient monthly or six-monthly vehicle tax payment schemes are unwittingly paying extra due to an automatic surcharge, new research has shown. The additional charge isn’t applied to one-off annual payments, catching out motorists on instalment plans.
Despite this unnecessary expense, the convenience of direct debit means many choose it over single payments. Yet for those able to manage it, settling the annual amount in one go can avoid these extra charges – without needing to change vehicles, reduce mileage, or move tax brackets.
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.”
About the data
The figure of people unaware of the surcharge was calculated from a YouGov survey of 2,000 UK adults. The survey took place on December 19, 2024, with all participants selected at random.
The 5% monthly direct debit surcharge was calculated based on the standard rate for cars registered on or after 01/04/17, according to DVLA data. This sum was divided by 12 to establish the additional charge for one month (£15.83).
This figure was then multiplied by the proportion of vehicle owners who paid using this method and were oblivious to the surcharge (39.08%). It was further multiplied by the percentage of motorists who stated they would change their payment method if they knew about the surcharge, according to the survey mentioned above.
