Electric van drivers avoid mileage tax as plug in hybrids face new levy

Plans to introduce a new electric vehicle (EV) pay-per-mile tax have taken a significant turn, as van drivers are set to be exempt, while plug-in hybrid vehicles (PHEVs) will not escape the levy. Government sources indicate that electric van owners will not be subject to the proposed 3p-per-mile tax, a decision likely to please major UK fleet operators and commercial vehicle manufacturers. In contrast, drivers of plug-in hybrids will face the charge, albeit at a discounted rate, in addition to the fuel duty on petrol currently paid.

Details of the new tax regime are expected to be unveiled in the upcoming budget by Chancellor Rachel Reeves. Industry observers note this move seeks to address an impending £600 million annual shortfall in fuel duty revenue as more motorists opt for electric over petrol and diesel models. Estimates suggest that by the time the measure takes effect in 2028, approximately six million electric cars will be on UK roads, each potentially facing an average annual levy of £250.

Manufacturers and trade bodies have greeted the announcement with scepticism. Carmakers describe the system as a bureaucratic nightmare, raising particular concern about the proposed compliance process. Under current proposals, EV drivers would estimate annual mileage and report it through an online portal, possibly providing photographic evidence of their odometer readings. These records would be checked during a vehicle’s yearly MoT inspection to ensure accuracy.

The practicalities of enforcing the tax on new vehicles remain unclear, given new cars are not required to undergo an MoT test until their third registration anniversary. This will likely add to industry concerns about the administrative burden of implementing the system and its potential impact on consumer confidence.

Industry leaders fear the measure could undermine the government’s zero-emission vehicle sales mandate, which requires 28 per cent of new cars sold in 2025 to be electric, rising sharply to 80 per cent by 2030. If higher running costs reduce the appeal of EVs, sales targets may become unattainable, further eroding trust in the UK as a stable destination for automotive investment.

Carmakers and dealers alike question the rationale of simultaneously offering grants to encourage electric vehicle uptake while introducing new taxes that might dampen consumer demand. The future of the UK’s EV market now hinges on how these competing incentives and disincentives are balanced in the months ahead.