Drivers of electric vehicles (EVs) could face the prospect of a new tax in this month’s Budget.
With pressure on the chancellor to find tens of billions of pounds in additional revenue, the BBC understands there have been “conversations” within government about the possibility of a new levy on EVs.
A government spokesperson told the BBC: “Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers.”
The statement follows a report in the Daily Telegraph that the Budget would include a new pay-per-mile charge for electric vehicles from 2028, following a consultation.
According to the Telegraph, EV drivers could be charged 3p per mile, on top of other road taxes, amounting to an extra £12 on a journey from London to Edinburgh. Drivers of hybrid cars would also be charged, but at a lower rate.
The paper says the idea is that owners would have to estimate, and pay for, their road usage for the year ahead. If, at the end of the year, they had driven fewer miles they would have a credit to carry over, but if they had driven more they would face a top-up charge.
Drivers of petrol and diesel vehicles pay fuel duty, so the transition to electric vehicles leaves a shortfall in government revenues, which are already under significant pressure.
Since April of this year, electric cars stopped being exempt from vehicle excise duty, due to a change made in the 2022 Budget.
“We want a fairer system for all drivers whilst backing the transition to electric vehicles,” a government spokesperson told the BBC.
“It is right to seek a tax system that fairly funds roads, infrastructure and public services,” they added.
However, the government was still backing the transition away from petrol and diesel, they said, pointing to £4bn in support already given, including grants to cut upfront costs by up to £3,750 per eligible vehicle.
“We will look at further support measures to make owning electric vehicles more convenient and more affordable,” they said.
Shadow chancellor Mel Stride disagreed with the plan to tax EV drivers and said now was not the time for “another tax raid”.
“It would be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill a black hole she has created in the public finances,” the Conservative MP said.
There has been growing concerns about the emerging “tax gap” from more petrol and diesel cars coming off the roads, as a growing share switch to EVs.
That has put pay-per-mile systems in the spotlight, but there has been push back from some quarters.
The Society of Motor Manufacturers (SMMT) said a pay-per-mile tax on EVs would be “the wrong measure, at the wrong time”.
“Introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake,” they added.
Edmund King, AA president, said while the government was losing fuel duty revenue, it should “tread carefully unless their actions slow down the transition to EVs”.
He added car sales indicated that the government’s own zero emissions target would not be met this year, and the detail of the proposal was needed “to ascertain whether these new taxes will be equitable or a poll tax on wheels”.
Car-selling platform Autotrader said the government needed “to use more carrot and less stick” regarding take-up of EVs.
Its chief executive Nathan Coe said any introduction of pay-per-mile taxes on EVs would increase their running costs, so was likely to affect demand.
“At the moment, one of the big differences is that whilst EVs do cost a little bit more up front, they are much cheaper to run. This kind of takes some of that benefit away.”
A corresponding increase to fuel duty, that would hit petrol and diesel vehicle owners would “obviously help” uptake of EVs, Mr Coe said.
Liberal Democrat Treasury spokesperson Daisy Cooper said: “It beggars belief that in the midst of a cost-of-living crisis and in the face of air pollution and rising respiratory diseases, the government is looking to hit people with an electric car tax.”
She added: “Minsters should be making it easier to have an electric car by rolling out more charging infrastructure across the country not penalising drivers with this unfair and short-sighted measure.”
