Electric vehicle pay per mile tax plan risks stalling transition to greener motoring

The government is poised to introduce a pay per mile tax for electric vehicles from 2028, marking a significant shift in how drivers are charged for road use. This change comes amid growing concerns about the looming shortfall in motoring tax revenues as Britain accelerates its transition away from petrol and diesel cars. Electric vehicles currently benefit from lower running costs and exemptions from many traditional motoring taxes, yet that landscape is set to change as the Treasury seeks to replace dwindling fuel duty income.

Reports indicate the new levy will require EV drivers to pay a supplement based on their annual mileage, with methods such as odometer checks or self-declaration under consideration. Department for Transport data reveals that battery electric vehicles are driven further than their petrol counterparts, averaging nearly 8900 miles per year. At a projected rate of 3 pence per mile, the government would collect an estimated 267 pounds per vehicle annually, potentially raising 375 million pounds from the current fleet of 1.4 million electric cars.

This approach mirrors the indirect tax paid on petrol and diesel through fuel duty, currently standing at 52.95 pence per litre. As fuel duty represents approximately 5 pence per mile for the average combustion engine vehicle, the government faces mounting pressure to ensure tax fairness between petrol and electric drivers, as well as to sustain vital public revenue streams. However, this proposal has sparked debate about its timing and potential effect on the rapid adoption of zero emission vehicles.

Carmakers, motoring groups, and advocates for electric mobility emphasise that the planned tax could undermine consumer confidence in electric vehicles, especially at a stage when incentives remain critical for the market’s growth. Past examples in New Zealand and Iceland demonstrate divergent outcomes; New Zealand’s introduction of road user charges for electric vehicles coincided with a sharp decline in sales, while Iceland maintained incentives and saw less impact on uptake.

For many drivers, running costs are already rising, given that public charging points include 20 percent VAT and often prove more expensive per mile than petrol, particularly for those without access to home charging. Experts warn that tax changes must not exacerbate existing inequalities or make electric vehicles less accessible to lower income households.

Think tanks and industry leaders call for careful reform, suggesting that if road pricing is necessary, it should be structured to preserve a financial advantage for electric vehicles over traditional cars. Recommendations from the Resolution Foundation include introducing mileage and weight based charges only for future EV sales, aligning them as part of vehicle excise duty to ensure clarity and fairness. The government maintains it will support the transition to electric vehicles, but the details of any forthcoming measures will be scrutinised for their impact on the move to cleaner, greener transport.