Pay Per Mile Tax for UK Electric Vehicles Raises Concerns Among Automakers and Analysts

The UK government is considering the introduction of a pay per mile tax on electric vehicles starting in 2028. This charge, set at 3 pence per mile, would be added to current road taxes. The measure has been proposed to mitigate the loss of tax revenue caused by the transition away from petrol and diesel vehicles.

Lisa Brankin, Managing Director of Ford UK, has urged Chancellor Rachel Reeves to reconsider the timing of this proposal, highlighting the risk that new levies could dampen fragile demand for electric vehicles. Brankin stressed that introducing additional costs would hinder the country’s push for widespread EV adoption. She observed that when the government established its target for 80 percent of new car sales to be electric by 2030, market optimism around electric vehicles was more robust than it is today. Recent trends reveal that consumer interest has cooled, putting manufacturers under increased strain to meet government targets.

The UK reintroduced an electric car grant in July, valued up to £3,750 per eligible vehicle, following pressure from industry leaders who argued that manufacturer targets required greater support. This incentive has led to record numbers of electric vehicle sales as companies and individuals take advantage of the grant. Nonetheless, Brankin warns that without ongoing assistance, Ford will face difficulty meeting its future objectives.

According to Brankin, heavy discounting and lower residual values for used electric vehicles have distorted the market. She called for the government to retain favourable company car tax rates for businesses integrating electric vehicles into their fleets, a policy she believes has been effective in encouraging broader adoption. As many new electric vehicles are sold to corporate fleets, maintaining lower rates could help preserve current momentum.

The Treasury has acknowledged the need to devise a fairer tax system for all drivers while continuing to support the transition to electric mobility. To this end, the government has allocated £4 billion in support measures, including grants and investments in charging infrastructure. Officials state that while fuel duty currently applies only to internal combustion vehicles, the evolving transport sector necessitates a comprehensive review to ensure sustainable funding for infrastructure and public services.

As the UK automotive market undergoes significant change, manufacturers and government officials remain engaged in discussions over policies that will define the future of vehicle taxation, corporate incentives, and the pace of the transition to low emission transport.