UK government set to introduce pay-per-mile tax for EVs

The UK government is set to charge a pay-per-mile tax on drivers of electric cars in a bid to plug a gap in fuel duty revenues, left by the transition away from ownership of petrol and diesel cars.

The Telegraph, BBC and Financial Times have reported that the measure is due to be included in this month’s budget, with the former stating that EV drivers would be charged 3p per mile. 

This would be in addition to the £195 vehicle excise duty that they are required to pay annually and, according to the Telegraph, is described by government insiders as “VED plus”.

As such, an EV driver who covers 8000 miles in a year would be required to pay £435 in charges annually; £240 in per-mile fees and £195 in VED.

A government spokesperson told the BBC that charging EV drivers per-mile would be “fairer”, given drivers of combustion-engined cars have long paid fuel duty – effectively levying them for each mile they drive.

The measure is set to be introduced in 2028, pending a public consultation. 

It could raise £1.8 billion a year by the early 2030s as the transition to electric power ramps up.

For reference, car industry body the Society of Motor Manufacturers and Traders said in April that there were now 1.3 million EVs on the road.

Questions remain over how such a scheme would be enforced.

The reports suggest that EV drivers would be required to estimate and declare their annual mileage when they pay VED. If they exceed this mileage they will be required to pay for the overage; if they travel fewer miles, they will get credit for the following year. But it remains unclear how mileages will be monitored or audited.

The move risks discouraging buying an EV, at a moment in which the industry has demanded action from the government to sway potential buyers who are on the fence. For example, the recent introduction of the Electric Car Grant – which discounts new EVs to varying extents based on their environmental credentials – has reinvigorated the market. 

Edmund King, president of the AA, told the BBC the government needed to “tread carefully”.