The charge would apply to electric vehicles
The Government has issued an update on pay-per-mile road pricing amid mounting concerns that a significant change could be introduced in the upcoming November Budget. Speculation has intensified that Chancellor Rachel Reeves may impose a 3p per mile levy on all electric vehicles.
Reports have suggested that the Government is responding to declining revenue, as the growing adoption of EVs has led to a sharp drop in fuel tax receipts. Motorists covering 8,000 miles annually could face an additional £240 per year in tax should the 3p per mile system be implemented.
Owners of petrol and diesel vehicles currently pay tax when purchasing fuel, whilst electric vehicle owners have been exempt from such charges. According to the Office for Budget Responsibility, standard petrol and diesel taxes stand at 52.95p per litre, paid at the forecourt in addition to VAT.
A recent parliamentary written question has raised concerns about the potential introduction of pay-per-mile pricing, notably not limiting the scope to electric vehicles alone – including petrol and diesel vehicles as well. Conservative MP Richard Holden asked Rachel Reeves: “What assessment she has made of the potential impact pay-per-mile road pricing on (a) rural motorists, (b) low-income drivers and (c) small businesses.”
Exchequer Secretary to the Treasury, Dan Tomlinson, has responded that the system is ‘under review’, with any changes to be announced at ‘fiscal events’: “Fuel duty is projected to raise £24.4bn in 2025/26 and will remain in place. At Autumn Budget 2024, the Government announced continued support for people and businesses by extending the temporary 5p fuel duty cut and cancelling the planned increase in line with inflation for 2025/26.”, reports the Express.
“The Chancellor meets with her Ministerial colleagues on a regular basis to discuss a wide range of issues. The Government keeps the tax system under review, with changes announced at fiscal events.”
Chancellor Rachel Reeves is set to reveal a policy to introduce a 3p per mile tax for EVs when she delivers her November 26 Budget, according to the Daily Telegraph. The scheme is expected to be implemented in 2028 following a consultation, and would cost EV drivers an average of £250 per year, as reported by the newspaper.
Motorist groups have voiced concerns that such a tax could deter some people from making the switch to electric vehicles. As more drivers transition from petrol or diesel cars to EVs, the Treasury faces a decrease in revenue from fuel duty.
Fuel duty generated just under £25 billion in the 2024/25 financial year. Successive governments have found the idea of introducing per-mile charges for driving – sometimes referred to as road pricing – politically sensitive.
The Daily Telegraph has reported that Ms Reeves’s electric vehicle (EV) scheme will require users to estimate their mileage for the upcoming 12 months, and make an additional payment on top of the vehicle excise duty (VED). Should they exceed this estimated mileage, they’ll need to top up their payment, while any unused funds would roll over into the following year. For instance, a 3p per mile fee could equate to £12 for a journey from London to Edinburgh, £5 from Cambridge to Bristol, or £2 from Liverpool to Leeds.
As of April, EVs are no longer exempt from VED. A Government spokesperson explained: “Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers whilst backing the transition to electric vehicles, which is why we have invested £4 billion in support, including grants to cut upfront costs by up to £3,750 per eligible vehicle.”
The spokesperson added: “Just as it is right to seek a tax system that fairly funds roads, infrastructure and public services, we will look at further support measures to make owning electric vehicles more convenient and more affordable.”
AA president Edmund King acknowledged the potential loss of fuel duty revenue for the Treasury, but urged the Government to “tread carefully” to avoid hindering the transition to EVs.
He commented: “We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or a poll tax on wheels.”
Steve Gooding, director of the RAC Foundation, a motoring research charity, has stated that the Treasury’s “fuel duty cash-cow” is nearing its end. He further added: “If the Chancellor is tempted to go down the route of introducing a distance charge for EV drivers but still encourage EV take-up, then she needs to look at how to cut the cost of public charging for the millions of people who don’t have the option to charge their cars at home.”
Recent snap polling by YouGov indicates that Brits are generally in favour of a pay-per-mile tax for electric vehicles (EVs). A survey conducted on 6 November, involving 5,833 adults across Great Britain, revealed that 43 per cent either “strongly support” or “somewhat support” the idea, while 34 per cent either “somewhat oppose” or “strongly oppose” it. Meanwhile, 23 per cent responded with “don’t know”.
The same YouGov poll also discovered that the concept tends to be more popular among older individuals compared to the younger generation.
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