The Chancellor is reportedly planning to make changes that will have a big impact on drivers of electric vehicles (EVs). The reported reforms come as one insider aware of Treasury thinking warned a newspaper that a new pay-per-mile plan for EVs would lead to a slump in sales of the cars.
Rachel Reeves is now said to be getting ready to cut charging costs for EVs to halt any slump in demand. The paper claims officials forecasts show the proposed 3p a mile charge on EVs from 2028 would have a serious impact on sales.
The government is under pressure to avoid this as it seeks to hit net-zero targets and phase out petrol and diesel cars in the UK.
The new proposals leaked to the Telegraph are designed to cut so-called network charges at public charging points. These have risen steeply in recent years.
In addition, the Treasury is reportedly looking at hacking back the 20 per cent VAT rate on chargers at service stations, residential streets and supermarkets. There is a lack of consistency in current UK policy as people charging at home face a rate of just five per cent.
The government is under fire over many plans raised in the Budget - with this being just one area where it is facing flak. Among these are the inheritance tax reliefs threshold, which just days earlier was risen to £2.5m for farmers and businesses after months of criticism.
An insider involved in talks with industry leaders told the Telegraph there were fears the pay-per-mile plan would "kill EV demand".
If it does come in with no changes, the tax is forecast to cost an average EV driver an extra £255 a year. The tax is designed to help the Treasury claw back funds as more turn to EVs and therefore stop paying fuel duty, which generates large funds for the Government.
Announcing the pay-per-mile plan at the Budget in November, the Chancellor said: “Because all cars contribute to wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just the type of car they own.”
The new tax is to be called the electric vehicle excise duty (eVED). It is set to be paid each year along with the existing vehicle excise duty (VED) - and will go up each year with inflation.
The government argues that tax paid by EV owners will be about half of what petrol and diesel drivers pay in fuel duty.
The scheme will work by requiring EV drivers to estimate their mileage for the year and either pay upfront or spread their payment across the year.
Treasury papers have shown that the Government has ruled out charging tax based on when or where people drive. Officials say this is to “protect motorists’ privacy”.
It therefore means mileage driven overseas by UK-registered cars will come under eVED.
Drivers of hybrid vehicles are also set to be hit with a 1.5p a mile tax from 2028.
A Whitehall source told the paper: “The way we convince people to switch to EVs is by showing people it is easy and it is cheap. There are savings to be had here for many people.”
A Government spokesman said: “The Government is boosting the EV transition by saving drivers up to £3,750 off a new car, with almost 50,000 people benefitting already, and investing over £7.5bn into the UK electric vehicle sector.
“We’re also reviewing the cost of public EV charging, which will look at the impact of energy prices, wider cost contributors and options for lowering these costs for consumers.”
