New mileage-based EV road tax confirmed

Pay-per-mile tax will arrive in 2028, says Chancellor - and is predicted to take a 400k-car bite out of EV sales

In one of the less surprising bits of Budget news announced today (after it was leaked), EVs will be subjected to a mileage tax by the end of the decade. The report from the Office for Budget Responsibility said that: "In 2028-29, the charge will equal £0.03 per mile for battery electric cars and £0.015 per mile for plug-in hybrid cars, with the rate per mile increasing annually with CPI.” Assume an average UK mileage of 8,000, and that’s another £240 a year for an EV driver to pay.

It’s been coming for a while, of course (though the inclusion of plug-in hybrids might raise some eyebrows) and is intended to offset some of the revenue expected to be lost from fuel duty. The recent introduction of the £195 fee for electric cars, having previously paid no VED, was a hint of things to come; already from April, it meant 1.7 million cars being eligible for payment that hadn’t been before. But there are still gaps to plug, with the new 3p-per-mile rate apparently equivalent to half the duty paid by drivers of petrol cars.

While it’s not clear yet how a mileage-based charge for EVs and PHEVs will work in reality, the report from the OBR suggested that it could raise as much as £1.1bn in its first year (2028-29), increasing to almost £1.9bn by 2030-31. Presumably, it’ll be those in company-provided EVs, covering tens of thousands of miles a year on the motorway, that will be paying the majority of that charge. But as the push continues to get private customers into battery-powered cars, they’re clearly not going to be immune from an additional cost. As if using public chargers wasn’t expensive enough for them, now public roads will cost as well…

This leads inexorably to another element of the OBR’s findings, which predicts that something like 400,000 EV sales will be lost as customers are put off by the extra money required to run one. This as manufacturers already struggle to hit the ZEV mandate, despite the introduction of a new Electric Car Grant and fleet sales accounting for a huge majority. As it stands, 28 per cent of new cars sold in the UK this year must be electric, and it’s meant to be 80 per cent by 2030. Which looks as ambitious - some might say foolhardy - as it ever has.

Nominally speaking, the budget is better for drivers of combustion-powered cars on the basis that fuel duty, which has essentially remained in stasis for more than a decade, will stay frozen. Though not, it seems, forever - there are plans for staged increases from September next year. Previously mooted attempts to charge road users more have wilted in the face of a cost of living crisis, but it seems likely that these will stick as (despite indications to the contrary) the government seeks to stress its support for a wider transition to battery electric cars.

This wholesale change, lest we forget, is meant to be complete by 2035 when the effective (EU-wide) ban on new combustion engines is supposed to take effect. However, in Europe at least, there are signs that this deadline might yet be watered down as Brussels is expected to unveil a raft of measures designed to support the automotive industry next month. Much as with the inevitability of a pay-per-mile EV tax, don’t be surprised if intensive lobbying for concessions means that future use of bio or synthetic fuel is set in stone. In other words, there is a huge amount still to play (and pay) for…

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