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Digital car taxing costs Britain £45m a year as unlicensed vehicle toll spirals

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The digital car taxing system, which replaced paper tax discs in October last year, is costing the UK coffers £45 million a year, according to Sunday Times Driving.

The lost revenue, revealed by the DVLA in the first official study since the digital transition, is a result of more untaxed vehicles on Britain's road.

A roadside survey carried out in the summer at 256 locations across the country found that 1.4% of vehicles were unlicensed, compared with 0.6% in a survey taken two years earlier.

In other words, there are now double the number of untaxed vehicles since the paper tax disc was scrapped – or equivalent to more than 500,000 vehicles.

The government has estimated that it will lose £80 million due to the problem - £45 million more than two years ago. This is a far cry from the £7 million of administrative savings it was claimed that abolishing the paper disc would make.

Analysts from the Department for Transport have admitted that the sharper than expected increase in the number of untaxed vehicles is probably linked to the abolition of the disc.

Used car buyers in particular are believed to be confused by the system. Under the new system tax is automatically cancelled when a vehicle is sold or ownership is transferred, with the new owner responsible for taxing it. If they fail to tax the vehicle, they risk a £1,000 fine.

Many of those fined said they had not been notified of the new rules.

DVLA's chief executive Oliver Morley defended the policy: "Almost 99% of all vehicles on the road are correctly taxed: that's around £6 billion in vehicle tax passed to the Treasury every year."

He added: "We write to every registered vehicle keeper in the UK to remind them when their tax is due and we have introduced a range of measures to make vehicle tax easy to pay. At the same time we are taking action against those who are determined to break the law."

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