Government making millions from 'double taxation', says AA

October's changes to the vehicle tax system means that Britain's motorists are spending millions paying tax twice on the same car, says the AA.

Tax discs RIP - the tax disc was scrapped in favour of a new system of tax that could not be transferred between car owners in October (Cate Gillon/Getty Images)

The UK's drivers are losing millions of pounds a year due to confusion over the new car tax system, the AA has claimed - but the Driver and Vehicle Licensing Agency (DVLA) has disputed their figure.

The AA claims that drivers are paying an extra £38 million a year due to the new system which was introduced in October.

The new vehicle tax system scrapped the paper tax disc which could be transferred between owners when a car is sold, replacing it with a system where buyers must pay the tax as soon as they buy the car.

Now, if you're unlucky enough to sell your car on 2 May, and your vehicle tax is due to expire at the start of June, you can't get a refund for the rest of May - you can only claim tax rebates on full months.

However, the person who buys the car from you that day must pay straight away, from the start of May - meaning that two people will have paid the full tax on that car for the month of May.

Vehicle tax can no longer be transferred between owners - meaning a single car may have tax paid on it by two different owners when it is sold. (Photo by Oli Scarff/Getty Images)

Edmund King, President of the AA, said that information about the new system just isn't getting through to drivers, and it's costing them money.

Speaking to the BBC, he said: "It's a form of double taxation."

"We estimate on a very conservative basis that drivers are losing out to the tune of at least £38 million a year, but it's probably a lot more."

The confusion may result in more than just a bigger tax bill - untaxed cars are clamped if they're spotted, and the number of clampings has risen since the new system came into force.

8,360 cars were clamped for not having road tax in the UK in March this year, compared to 5,333 in March 2014.

However, the DVLA disputes the AA's claims - it says the new method will protect drivers from penalties, as it makes it harder for them to unknowingly buy an untaxed vehicle, as they have to tax it themselves.

It also said that any revenue gains it makes from this "double taxation" is offset by the automatic refund it gives on full months of tax to people who sell their car - adding it refunded £120 million in vehicle tax to drivers between October 2014 and January this year.

The DVLA is sending out more reminder letters to motorists about the new system, to avoid more people being tripped up by the change.