Research by Go.Compare Car Insurance found that two in five (39%) drivers don’t realise that it’s more expensive to pay car tax monthly or every six months, rather than annually. The study found that this surcharge adds up to £56.3m in additional fees for UK motorists every year.
Almost half (49%) of drivers questioned said they would pay differently if they were aware of the extra surcharge – meaning around £27.5m per year is being wasted.
As an example, a vehicle owner who pays £1,000 per year in car tax by monthly instalments would pay an extra £50 each year in surcharges. Over five years, that would add up to £250 spent on unnecessary fees. Those with higher vehicle tax rates could be wasting even more.
The surcharge is added automatically to vehicle tax 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.
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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.”
