A new study has found that 2.9 million UK drivers pay more for their Vehicle Excise Duty car tax than necessary, simply because they’re unaware of a 5% surcharge applied to their payments by the DVLA.
Drivers who choose to spread the cost of their car tax through monthly direct debit instalments have to pay this 5% surcharge, meaning they end up paying more overall.
Close to two-fifths (39%) of motorists admit they didn’t know there was an extra cost for paying in this way, according to the research by Go.Compare Car Insurance. Among all vehicle owners who pay in monthly instalments, this amounts to 5.6 million who are unaware of the extra fee included in their tax.
For drivers paying in this way, the 5% fee quickly adds up. In total, UK motorists pay an additional £56.3 million a year without realising. Almost half (49%) of these drivers said they would pay differently if they knew about the surcharge. This means 2.9 million paid more than they needed to because they were unaware of the 5% extra fee, equating to £27.5 million that could’ve been saved.
To put the impact into perspective, a vehicle owner who pays £1,000 a year in car tax by monthly instalments would pay an extra £50 each year in surcharges. Over five years, that’s £250 lost on unnecessary fees. Those with higher vehicle tax rates could be wasting even more.
The surcharge is added automatically to vehicle tax that is paid monthly or every six months, but is not included on annual payments. Because the charge is included in the instalment plan, many motorists don’t notice they’re paying more than necessary.
Despite this extra cost, many people opt for direct debit simply because it’s convenient. But for those who can afford to pay in full, switching to a single annual payment at renewal is a simple way to avoid unnecessary charges – without needing to change their car, mileage, or tax band.
Tom Banks, car insurance expert at Go.Compare, 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.”
