The UK government’s new pay-per-mile tax on electric cars will also include plug-in hybrid cars, chancellor Rachel Reeves announced in the long-awaited Autumn Budget on Wednesday.
The news was originally revealed within documents released in error by the Office for Budget Responsibility (OBR) ahead of Westminster's announcement.
Those documents also confirmed plans by the government to end the 5p freeze on fuel duty, which will therefore increase for the first time since 2010, make changes to the 'luxury car tax', provide extra cash for the Electric Car Grant (ECG) and much more.
Pay-per-mile tax to hit EV and PHEV drivers
The new pay-per-mile tax – or 'eVED' – is being brought in as part of an effort to claw back lost revenue from the duty imposed on petrol and diesel as motorists transition away from ICE vehicles.
The levy is set at 3p per mile driven in an EV and 1.5p per mile driven in a PHEV. This will come into effect from April 2028.
The OBR forecasts that His Majesty's Treasury will thereby raise £1.1 billion in the 2028-29 tax year, increasing to £1.9bn by 2030-31.
However, “the new charge is likely to reduce demand for electric cars, as it increases their lifetime cost”, said the OBR.
It also forecasts that the new tax will preclude some 440,000 EV sales between now and March 2031.
This will be ameliorated, however, by 320,000 of increased sales as a result of the ECG, which the government announced this July. This figure was adjusted hours after the OBR warned the ECG would account for just 130,000.
The OBR warned that the decrease in EV demand resulting from eVED will make it harder for car makers to satisfy the government’s ZEV mandate. This requires an EV sales mix of 28% this year, rising to 80% by 2030.
As such, it notes that “to meet the mandate, manufacturers would therefore need to respond through lowering prices or reducing sales of non-EV vehicles”.
Speaking in the House of Commons, Reeves said: "Because all cars contribute to the wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive, not just by the type of car they use.”
She claimed this would “double” the road maintenance fund in England “over the course of this parliament”.
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As far as i can see, it still costs more to make an EV than an ICE car, and it still costs more to make Electricity, than petrol, so you either get less tax from EVs (and we have to pay more tax else where to make up for it), or you accept the EVs will cost more to buy and run than their ICE alternatives.
These tax changes wont help the financial case for EVs, but if EVs are as good as their supporters believe wouldnt people buy them anyway? Its not as if a V8 has ever made financial sense in the UK, but that hasnt stopped me buying several of them
Alongside this, an extra £100m will be used to increase the size of the UK’s EV charging network. This money includes support for installation of home and workplace chargers.
We may as well piss £100m up a wall. The vast number of public chargers at present lie empty. What about tackling the public charge cost first, then expand the network when ( or if ) demand rises?
I'm led to believe 40% of people do not have access to charging at home. What about them? If they wish to be more environmentally conscious and reduce pollution levels, we're told PHEV is a midway solution. She's all but killed PHEV off with this announcement.
You've got to walk before you can run. The Gov need to tackle the cost of public charging first before spending any taxpayers money investing in EV infrastructure.
What problem do these people have to understanding EV isn't working. Forget the UK, it's not working anywhere in the world apart from countries like Norway where huge, unsustainable public subsidies are being thrown at the technology.
The simple way to implement the pay per mile charge, is to add the luxury car charge to all EVs and PHEVs for the first 3 years only, and then implement the PPM charge based on the mileage recorded on an MOT, that data is uploaded automaticaly anyway, so the driver doesnt have to estimate and its official. Add the bill to the VED charge for the particular vehicle job done.
The driver can then choose to pay the whole amount or monthly as they do now.
For those that dont pay, and get caught driving without tax, ensure the bill is added to any subsequent fines.
If the driver sells the car or decides to SORN it before they pay the bill, the DVLA can refuse to issue any paperwork until its paid.