A new study has revealed that 2.9 million UK drivers are overpaying the DVLA for their Vehicle Excise Duty, or car tax, due to a lack of awareness about a 5% surcharge applied to their payments. This additional cost is incurred by motorists who opt to spread their car tax payments across monthly direct debit instalments, resulting in them paying more overall.
The research, conducted by Go.Compare Car Insurance, found that nearly two-fifths (39%) of drivers were oblivious to the extra charge associated with this payment method. Among all vehicle owners who pay their car tax in monthly instalments, an estimated 5.6 million were unaware of the added fee included in their tax.
The 5% surcharge can quickly accumulate for those paying in this manner. In total, UK drivers unknowingly shell out an extra £56.3 million annually.
Almost half (49%) of these drivers confessed they would alter their payment method if they were aware of the surcharge. Consequently, 2.9 million drivers paid more than necessary due to ignorance of the 5% additional fee, equating to a potential saving of £27.5 million, as per the research team’s findings.
To illustrate the impact, Go.Compare explained that a vehicle owner paying £1,000 annually in car tax via monthly instalments would incur an extra £50 each year in surcharges. Over a five-year period, this amounts to a loss of £250 on unnecessary fees.
Those with higher vehicle tax rates could be squandering even more. Motorists using the more manageable monthly or biannual vehicle tax payment plans are unknowingly shelling out extra due to an automatic surcharge, research has revealed. The additional fee isn’t tacked onto lump-sum annual payments, slipping under the radar of drivers on instalment schemes.
Despite this avoidable outlay, the lure of direct debit’s ease means many opt for it over one-off payments. However, for those in a position to do so, paying the annual sum in full can skirt these surplus charges – no need to switch vehicles, alter mileage, or jump tax bands.
Tom Banks from Go.Compare, an expert in car insurance, 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 oblivious to the surcharge was derived from a YouGov survey involving 2,000 UK adults. The survey was conducted on 19 December 19, 2024, with all participants chosen randomly.
The 5% monthly direct debit surcharge was determined based on the standard rate for cars registered on or after 01/04/17, as per DVLA data. This amount was divided by 12 to ascertain the extra charge for one month (£15.83).
This figure was then multiplied by the proportion of vehicle owners who paid using this method and were unaware of the surcharge (39.08%). It was further multiplied by the percentage of drivers who indicated they would alter their payment method if they were aware of the surcharge, according to the aforementioned survey.
