Road tax evasion has fallen by 40%, according to statistics released by the Department for Transport (DfT).
The DfT revealed that just 1% of vehicles are not licensed, compared with 1.7% in 2007.
The Driver and Vehicle Licensing Agency (DVLA) collected 99.1% of all potential revenue from road tax during 2008.
Transport minister Jim Fitzpatrick said: 'I am delighted that we have seen such a significant fall in the level of road tax evasion, but we aren't complacent and will continue to take action against those who fail to license their vehicles.
'There is no way out for road tax evaders.'