Instead of displaying a disc to prove that a car is fully taxed, motorists will instead register their car online.
Traffic cameras will then automatically track vehicles on the road and identify those that are not registered for road tax.
The change is part of the trend to provide paperless services, a drive that has already seen millions of people submitting tax returns online.
Tax discs were introduced in 1921 and it remains a legal obligation for vehicles on the public highway to display a valid disc.
Inspecting discs was once a regular duty for police officers. However, vehicles’ tax statuses are now stored in a central electronic register, meaning officers can verify if a vehicle is taxed simply by checking the registration number on the database.
A Treasury spokesperson said the change will save British businesses £7 million a year in administrative costs.
The 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.”