The tax disc to show motorists have paid vehicle excise duty is to be replaced with an electronic system, Chancellor George Osborne has announced in his Autumn Statement.

The disc was introduced in 1921 but officials say it is no longer needed with the DVLA and police now relying on an electronic register.

The new system will allow people to pay the charge by monthly direct debit.

The Treasury said it showed government was moving "into the modern age".

It would also make "dealing with government more hassle free", a spokesman added.

At present, motorists are able to choose whether they pay VED in twelve or six month instalments.

Analysis Frankly, this change won't make a great deal of difference to most drivers, apart from removing a little bit of admin from their lives. (Yes, I do know that some people have a sentimental attachment to that small disc in the window that is usually a bit torn from trying to remove it from its perforations). Just like now, you'll still be able to buy it online and at the Post Office, you just won't get a physical disc. You'll still get a reminder in the post a few weeks before it runs out. And you'll be able to check how long you've got left online too. For the first time you'll also be able to pay by direct debit, for an extra 5% administration fee. The fact is that the majority of tax evaders are caught using police cameras that automatically check your number plate, rather than someone actually looking in your window. Around 44m tax discs were issued last year. It's thought around a 800,000 people were caught driving without paying.

The latter option costs 10% extra each year, but this is expected to be cut to 5%.

The new option of paying by monthly direct debit is also expected to cost 5% more than paying for a full year in one go.

The changes are expected to come into effect in October 2014.

In the 2012 Budget, the government announced its intention to bring in a direct debit system for paying VED and said it would seek the views of motoring groups on the merits of such a change.

It also said it would "consider whether to reform VED over the medium term".

A spokesman for the Driver and Vehicle Licensing Agency (DVLA) said the body received approximately 160,000 reports from members of the public of potentially untaxed vehicles last year.

200,000 drivers in all were spotted having not paid VED last year, by the public or by the authorities - or by both, he added.

The DVLA also took action against 600,000 drivers whose non-compliance was revealed by analysis of its records, he said.

Origin of car tax: Commons in 1888 Chancellor George Goschen: Apart from the Carriage Tax, which is a tax mainly on the more luxurious carriages - carriages, used for pleasure - there is at present no tax on any other vehicles, however much they may destroy the roads. We propose to put a duty of £1 a-year upon every vehicle exceeding 10 cwt. in weight, a very moderate limit to take. Members will acknowledge that the principle that all those who use the roads should pay for them, and should pay in some proportion to the wear and tear that they cause, is just. But I have not yet exhausted the subject. We propose, also, to put a very small Wheel Tax upon every vehicle. Colonel Nolan, MP for Galway North: Not on carts? Chancellor Goschen: Yes. We propose a duty of 2s. 6d. per wheel upon all carts over 2 cwt. Colonel Nolan: Oh!

"Evasion is estimated at 0.6% - the second lowest figure ever," he concluded.

On Twitter, presenter of BBC Radio 4's Money Box Paul Lewis wondered how prospective buyers of second-hand cars would know in future when the vehicle excise duty paid would expire.

"How will people tell if [a] vehicle's been abandoned?" he added.

After the demise of the paper disc, the Telegraph's Steve Hawkes said, enforcing the digital system would entail greater use of surveillance cameras.

"More personal data lodged and presumably sold on then," he commented.

Vehicle tax was introduced in the 1888 Budget and the system of excise duty applying specifically to motor vehicles was introduced with the Roads Act 1920, with the tax disc appearing the following year.