There has been an increase in the number of drivers having vehicle tax Direct Debits cancelled due to a lack of funds, according to new research. An investigation by the RAC found almost a million drivers had their Direct Debits cancelled in the 2021-22 financial year – up nine percent on the previous year.

Under current procedures, a missed payment or unpaid Direct Debit leads the Driver and Vehicle Licensing Agency (DVLA) to contact the vehicle keeper to inform them it will attempt a further Direct Debit on a specified date. If this fails, the mandate is cancelled and the owner is advised that the vehicle is not taxed.

Figures obtained by the RAC through a Freedom of Information (FOI) request showed 950,377 motorists had their Direct Debit car tax payments cancelled because there was not enough money in the account in the last financial year. Although that was a noticeable increase on the 2020-21 financial year, it was still fewer than the 1.1 million cancelled in 2019-20.

Worried woman calculating her budget

More worryingly, though, the figures show that between April and December 2022, more than 720,000 people had their Direct Debits cancelled. The RAC says should this trend continue, the 2022-23 financial year could see the total eclipse even 2019-20.

So far this financial year, the overwhelming preference among drivers is to pay Vehicle Excise Duty monthly by Direct Debit, with 86 percent choosing this method. Just 10 percent pay annually, with less than four percent paying every six months. And the tendency towards monthly payments is increasing, with the number of drivers using that method up by three percent in the two years to the end of March.

“Spreading payments helps people budget when paying vehicle tax, so it’s very worrying that some are now struggling to do this,” said the RAC’s head of roads policy, Nicholas Lyes. “With recent RAC research revealing a worrying trend of drivers putting off repairs and cutting back on vehicle servicing because of household budget pressures, we are concerned the increase in the number of cancelled DVLA Direct Debits is part of a bigger picture of people struggling with the running costs of a vehicle.

“It’s important to realise that two consecutive failed Direct Debits from one bank account could lead to the DVLA removing that as a payment option. If drivers are struggling with payments, they should get in touch with the DVLA, particularly if the agency has already contacted them. Ignoring the problem carries an £80 fine, along back the outstanding tax. And those who don’t do this risk their vehicles being clamped or crushed.

“While spreading vehicle tax costs can be appealing from a budgeting point of view, drivers should also be aware they will end up paying more if they choose monthly or six-monthly payments than they would if they paid in one go annually.”