The tax disc is to be scrapped after more than 90 years of being displayed on British motorists' cars.
Chancellor George Osborne is today set to announce that car tax will be replaced by a modern electric system.
Drivers will also be able to pay for their vehicle exise duty by monthly direct debit for the first time but this option will cost an extra five per cent.
Mr Osborne is also reducing the extra charge for paying for a six months car tax as opposed to one running for a year from 10 per cent to five per cent in a move to help hard-pressed motorists.
It is thought the move to scrap the tax disk will save British businesses around £7 million pounds a year in administration costs.
Drivers will still be able to tax their motor vehicles at a post office or over the phone.
The changes are set to come into force from October 2014.
A Treasury spokesman said: "This is a visual symbol of how we are moving government into the modern age and making dealing with government more hassle free."
Vehicle tax was introduced in the 1888 budget and excise duty specifically for motor vehicles started in 1920 with the tax disc appearing the following year.
