For more than 90 years, all vehicles on British roads have been required to display a tax disc.
George Osborne will today announce that the paper discs will be consigned to history next October as part of an overhaul of vehicle excise duty.
The move has been made possible because of the increasing use of an electronic register of cars, vans and lorries to identify tax dodgers.
The first vehicle taxes were introduced in 1888 and the current system of excise duties to help pay for the maintenance and construction of roads was introduced in 1920. The first tax discs were issued a year later.
A Treasury spokesman said: “This is a visual symbol of how we are moving government into the modern age and making deal with government more hassle-free.”
The department said the abolition of paper discs – which will save £7m in administration costs – was supported both by the police and the Post Office.
Drivers will also, for the first time, be able to spread the cost of road tax by paying for it monthly by direct debt, the Chancellor will tell MPs in the Autumn Statement.
The charge for paying by direct debit will also be reduced from ten per cent to five per cent. Motorists will still be able to tax their cars by telephone or in person at a post office.