The Government has made an estimated £38m from the 'double taxing' of cars following its radical move last year to scrap the paper tax disc, according to the AA.

Motorists haven't had to display their vehicle excise duty (VED) car tax discs on their windscreens since last October, when the Driver and Vehicle Licensing Agency (DVLA) began logging tax details electronically. See The end is nigh for tax discs MSE News story for the key changes.

Under the new regime, tax is automatically cancelled and the unused months refunded when a vehicle changes hands. However, the old owner can reclaim tax only for full calendar months. As an example, if you sold your car today, you wouldn't be refunded the unused tax from 6 May to 31 May.

Despite this, the new owner is required to tax the car immediately, so there can be an overlap where an effective 'double payment' is made.

The AA says it has heard of cases where a car is transferred from one member of the family to another, but the family have been unpleasantly surprised to find that their VED was not refunded for that month, while the new owner had to purchase VED for the full month.

Increase in clamping of untaxed cars

The AA says it's seen a 71% increase in the number of cars clamped for being untaxed, up from 5,115 in February last year to 8,741 this February. In March 2015, clampings were still running above 8,000 a month.

It says one reason for this is a lack of understanding about the new rules. Less than two months before the October changes, 42% of a sample of 18,000 AA members knew nothing about them, and more than half (51%) did not know that unexpired tax couldn't be passed on.

A further 60% didn't know about the automatic cancellation of the tax disc. See's Motoring MoneySaving guide for 50+ quick tips to cut driving costs.

AA members have 'expressed outrage'

AA president Edmund King says: "UK drivers now pay 'double tax' for the month that a vehicle changes hands and the DVLA's clampers are now netting 3,000 more untaxed cars a month than this time last year.

"It is right that those who deliberately evade paying vehicle tax are caught and punished. But it is a very harsh lesson for those who may not be aware a tax disc is now automatically cancelled when a vehicle changes keepership.

"AA members have contacted us expressing outrage that their apparently taxed car was not taxed despite it having a valid disc on display. The DVLA must adopt a cautious and more flexible approach to enforcement during this transition."

'Revenue gains offset by automatically refunding more motorists'

A DVLA spokesman says: "Ending vehicle tax at the point of sale is a consumer protection measure to prevent used-car buyers unknowingly buying or keeping an untaxed vehicle which they believe to be taxed.

"Previously, two-thirds of all used vehicles were sold without tax so it is no different for the majority of motorists.

"Any potential revenue gains are offset by automatically refunding more motorists. Between October 2014 and January 2015 we refunded around £120 million, which is more than double the amount in the same period a year before."