Numbers of motorists failing to pay vehicle excise duty (VED), also known as car tax or road tax, has more than doubled since the end of the paper tax disc.
An estimated 560,000 vehicles on UK roads are evading tax, according to official figures from the Department for Transport (DfT).
The RAC described this as a “worrying” increase on the previous figure of 210,000 which was recorded in 2013 before the paper disc became obsolete.
The latest data from a survey in June shows that 1.4% of vehicles in use are unlicensed, which could cost about £80 million in potential lost revenue each year, although some of this will have been recovered through enforcement activity or payment by arrears.
The 2013 figure was just 0.6%, costing £35 million.
When the paper disc was ended in October last year the Government said it would eventually save the Driver and Vehicle Licensing Agency (DVLA) around £7 million a year.
But motoring groups expressed reservations that it could lead to an increase in the number of motorists failing to pay duty.
Commenting on the latest figures, RAC chief engineer David Bizley said: “These are very worrying and disappointing statistics indeed.
“Sadly, the concerns we raised about the number of car tax evaders going up at the time the tax disc was confined to history have become a reality.”
He warned that the UK cannot afford the growth in lost revenue to continue “for the sake of both road safety and the country’s finances”.
DVLA chief executive Oliver Morley said: “Almost 99% of all vehicles on the road are correctly taxed: that’s around £6 billion in vehicle tax passed to the Treasury every year.
“We write to every registered vehicle keeper in the UK to remind them when their tax is due and we have introduced a range of measures to make vehicle tax easy to pay.
“At the same time we are taking action against those who are determined to break the law.”
The DVLA said 75% of motorists pay tax online or over the phone, including 11 million who have switched to direct debit since the paper disc was ended.
Motorists who have not paid their tax can be spotted on automatic number plate recognition cameras or by police checking VED data information.
Mr Bizley called for the traffic survey to be repeated in a year – rather than the normal two-year period – to establish whether the increase in tax evasion was a “temporary result of the new system”.
If not, then “action will have to be taken swiftly,” he added.