The tax disc for cars and other vehicles is to be scrapped after 90 years, Chancellor George Osborne announced on Thursday.

The move is predicted to save businesses a total of £7 million a year in administration costs as the discs are replaced by an electronic system for paying road tax.

Drivers will still be able to pay their vehicle excise duty in person at a Post Office or on the phone.

A Treasury spokesman said: “This is a visual symbol of how we are moving government into the modern age and making dealing with government more hassle-free.”

The changes, announced as part of the Autumn Statement, will become law as part of next year’s Finance Bill and come into effect from October.

Under the new system, motorists will also be able to pay for taxing their car by monthly direct debit, although this will cost an extra five percent.

A tax on motor vehicles was introduced in 1920 and the first tax discs appeared a year later.

Meanwhile, new car registrations have already topped those of 2012 with one month of the year still to go.

A total of 159,581 new cars were registered in November, up seven percent from a year earlier, the Society of Motor Manufacturers and Traders said.