Key Points:
-
Rate and Cost: The proposed charge is around 3p per mile. With the existing £195 annual Vehicle Excise Duty (VED), an average EV driver covering about 8,300 miles a year could pay approximately £445 annually in total road taxes. This equates to about £37 per month.
-
Implementation Timeline: Announced in the November 2025 Budget, followed by a public consultation through early 2026. The policy will be finalized and legislated before launching in April 2028.
-
How It Works: Drivers will estimate their expected annual mileage and pre-pay the tax along with VED. If actual miles are fewer, a credit will be carried forward; excess mileage will trigger a top-up payment. This system avoids reliance on GPS tracking, addressing privacy concerns.
-
Hybrid and Petrol/Diesel Vehicles: A lower per-mile rate is planned for hybrids. Traditional fuel vehicles continue to pay fuel duty, which remains the highest contributor to road funding.
-
Revenue Goals: The government aims to raise around £1.8 billion per year by 2031 to support road infrastructure and public services.
-
Impact on Drivers: Although an additional cost for EVs, this pay-per-mile tax maintains a financial advantage over petrol/diesel vehicles due to lower running costs. The government frames the change as a fair update to the road tax system in a shifting automotive landscape.
-
Criticism and Support: Some see this as a necessary evolution in taxation as more vehicles electrify. Others worry about its effect on EV adoption and affordability for high-mileage users.
Implications for motorists:
Positives:
-
Fairer tax system: It replaces lost fuel duty revenue as EVs increase, making road tax more equitable for all drivers based on actual usage.
-
Cost advantages for EV drivers remain: Even with added charges, EVs often cost less to run than petrol or diesel cars, especially when factoring in lower maintenance.
-
Encourages efficient driving: Paying per mile incentivizes minimizing unnecessary trips and adopting fuel-efficient behaviour.
-
No intrusive GPS tracking: The policy uses self-reported mileage estimates with reconciliation payments, addressing privacy concerns.
Negatives:
-
Additional costs for EV drivers: Many will face a yearly increase around £250, hitting high-mileage and rural drivers hardest who rely more on cars.
-
Potential barrier to switching: Extra charges may dissuade some buyers from choosing EVs, slowing down the government's net-zero ambitions.
-
Complexity and fairness issues: Those with variable mileage or certain social circumstances might find estimating costs difficult, with concerns about equity.
-
Increased financial burden on certain groups: Rural and lower-income households who drive longer distances may be disproportionately affected.
Overall, the policy aims to modernize vehicle taxation in line with changing technology but poses challenges in balancing fairness, cost, and environmental goals. Motorists should prepare by monitoring mileage and considering total ownership costs as the policy approaches implementation around 2028.