A new study by Go.Compare Car Insurance has revealed that 2.9 million UK drivers are overpaying the DVLA for Vehicle Excise Duty due to a lack of awareness about a 5% surcharge applied to monthly direct debit payments. The research found that nearly two-fifths (39%) of drivers were unaware of the extra charge, leading to an additional £56.3 million paid annually.
The surcharge applies only to those who pay in monthly or biannual instalments, not to those who pay the annual lump sum. For example, a driver paying £1,000 annually via monthly instalments would incur an extra £50 each year, totalling £250 over five years. The study estimated that 2.9 million drivers could save a combined £27.5 million by switching to annual payments.
Tom Banks from 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. Those who can afford to pay in full should consider switching to a one-off annual payment to save on the surcharge.' He added that while past surcharges cannot be reclaimed, drivers can avoid future fees by switching at renewal.
The findings are based on a YouGov survey of 2,000 UK adults conducted on 19 December 2024. The DVLA's standard rate for cars registered on or after 1 April 2017 was used to calculate the surcharge, with the monthly extra cost estimated at £15.83.
