The tax disc, which displays proof of payment of vehicle excise duty, is to be scrapped, the Chancellor has revealed as part of his Autumn Statement.
It will be replaced with an electronic system, which will allow individuals and businesses to pay by monthly direct debit.
The move will come into force in October 2014 and, according to the Government, will "reduce administration costs and burdens".
VED is currently paid in either six-monthly or annual instalments and the former costs 10% more, but this will be cut to 5% from October 2014.
Those paying VED can now do so on a monthly, biannual or annual basis and there will no longer be a need to display a disc in the window of the vehicle.
The Government said it would consider reforming VED in the medium term in its 2012 Budget.
The tax disc was first introduced in 1921 but the Government believes it is now redundant because the police now use an electronic register to keep track of VED payments.