In the UK, Shadow Chancellor Rachel Reeves is preparing to introduce a new pay-per-mile tax targeted to electric vehicles. This announcement will be featured in the province’s next budget release on November 26. This implementation directly addresses the growing revenue deficit resulting from the transition to electric vehicles. With the growth of EVs, by 2028 we anticipate that 6 million drivers will own or lease an electric car or van.
The tax would impose an average charge of £250 annually on EV drivers. First, they will have to pay 3p per mile as a charge, in addition to all of their current road tax. This amendment would help lay the groundwork for a more equitable taxation system. At present, owners of petrol and diesel vehicles contribute around £600 per person annually in fuel duty.
Reeves’ plan would do exactly that, restoring financial strength eroded by spiraling fuel duty revenue. It’s a great pivot to make as more motorists get greener options and begin driving less. The government has recognized the necessity for an equitable system that includes electric vehicle users, as stated by a government spokesperson:
“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers.” – A government spokesperson
There will be a consultation process about this tax, starting before it goes into effect in 2028. This engagement with the public is crucial to ensure that the tax reflects the needs and concerns of various stakeholders, including current and prospective electric vehicle users.
As we rapidly approach the millionth electric vehicle on UK roads, within this current parliamentary term, experts already forecast that revenue gap created by abandoning traditional fuel duties will reach £20 billion to £30 billion. Creating a new pay-per-mile tax would be the most effective way to close this fiscal gap. This would allow the Treasury to guarantee long-term stable funding for infrastructure and other public services.
Looking forward to these transformations, there is a clear underbelly of demand among travelers to adopt new, technology-enabled insurance solutions. Nearly one-third of Britons are investigating “black box” car insurance. Because this new kind of insurance tracks people’s driving patterns, many people can expect to pay less once the new tax cuts start rolling out.
Political advocacy groups such as the Campaign for Better Transport welcomed the plans with open arms. A year ago, they implored Reeves to implement a mileage based user charging program. Their support illustrates the bipartisan momentum building for a new vehicle taxation system. This new approach is a much better fit for what we’re trying to accomplish environmentally.
As the announcement date approaches, we expect everyone’s focus to be on how the public reacts to PRR proposals. Stakeholders are still waiting to see whether they will lead UK government at all levels to create a more sustainable and equitable transportation system.