Paper tax discs are to be scrapped and replaced by a modern electronic system, Chancellor George Osborne has announced.
The Chancellor revealed he is bringing an end to the affixable circular discs that have served the UK for 90 years in order to save motorists time and businesses £7 million a year on administrative costs.
The new system will for the first time give drivers the option of paying for their road tax by monthly direct debit, although this will cost an extra 5%.
Drivers who opt to pay for six months instead of a year will see a reduction in their road tax bill, with the added surcharge dipping from 10% to 5%.
The plans are expected to save British motorists around £20 million in total over the course of a year.
Road users who do not have access to the internet will still be able to pay over the phone or at a Post Office.
"This is a visual symbol of how we are moving government into the modern age and making dealing with government more hassle free," a treasury spokesman said.
The proposals were announced during Mr Osborne's winter statement and will come into effect in October 2014.
Treasury officials said that electronic systems have rendered paper tax disc unnesseasary for enforcement purposes as the information is already stored on police and DVLA computer systems.
The road tax disc first appeared in 1921 after an excise duty applying specifically to motor vehicles was introduced in 1920.
RAC head of external affairs Pete Williams said: "This really does mark the end of an era and many motorists may even feel cheated from not receiving an official 'public' certification that shows their car is legal to use the nation's roads. However, in reality this should make little material difference as long as it doesn't hinder enforcement.
"It is right that we move with the times and with high proportions of our daily transactions happening online, including millions of people already using the government's web-based system to register, pay and order their tax disc, this should not be too much of a shock.
"There will no doubt be a great deal of nostalgia in the years to come looking back on the role the tax disc played in our annual motoring lives. In fact this can already be seen with the thousands of classic car owners who have pre-1966 vehicles but still display a tax disc despite being exempted from the annual road tax."