Pay-per-mile tax set out for electric car drivers
A new Electric Vehicle Excise Duty (eVED) system will be introduced from 1 April 2028, requiring drivers of electric cars to pay 3p per mile, the UK Government has confirmed.
The new eVED system will come into force alongside the current road tax system, in an attempt to offset the losses from fuel duty as more drivers switch from combustion to electric power.
Plug-in hybrid drivers will also be hit by the tax, although at a reduced rate of 1.5p per mile. Rates for both EVs and PHEVs will rise with inflation from 2029. Initially, it's expected that electric vans will be exempt from the tax.
To calculate their eVED, drivers will need to submit a mileage reading from their car when renewing their vehicle tax, and then estimate the mileage they expect to cover over the coming tax period. Drivers will then be able to pay an upfront charge based on this estimate, or pay in increments over the year. The data will be compared with the cars' annual MOT data, which will be sent to the DVLA and monitored over time.
If a driver ends up driving fewer miles by the end of the year, they will have a credit to carry over. However, if they exceed their mileage estimation, they will face a top-up charge.
Following the recent consultation on eVED, the Government made several significant changes to the original proposals, including abandoning plans to subject new EVs under three years old to separate mileage inspections. It will also simplify the process for fleet operators, with further details due to be announced in the future.
However, some industry experts have argued that the Government failed to resolve some of the policy's biggest potholes following the consultation.
Vicky Edmonds, CEO of EVA England, said: “This policy still does not work for drivers. The Government has made one welcome change for newer EVs, but the wider scheme remains too complex, risks leaving people out of pocket and fails to give drivers the confidence they need.
“At such a crucial point in the switch to electric, ministers should be making the system simpler, fairer and easier to understand, not pressing ahead with a policy whose key faults remain unresolved. This now piles pressure on the public charging review that really needs to work for drivers and pave the way for affordable charging.”
The introduction of eVED means that running an electric car will become more expensive than it was before. Previously, one of the biggest incentives for running an EV was the lower day-to-day tax charges. On the one hand, the Government is attempting to boost sales of new EVs through the Electric Car Grant and the slashing of red tape to make it easier for roadside chargers to be installed. But the pay-per-mile scheme could dissuade many from making the switch.
With the additional pay-per-mile tax, EV drivers covering an annual average of 8000 miles will need to pay £440 per year – £240 for the pay-per-mile tax and £200 in road tax (VED).
Industry experts are also questioning how the Government will aim to tackle the inevitability of anomalies, odometer tampering, and other attempts to defraud the system.
Nick Connor, CEO of the Institute of the Motor Industry (IMI), said: "There is one big question the response does not yet answer: can eVED be delivered safely and consistently if the system assumes every MOT garage can deal with EV mileage anomalies?
"The risks around odometer tampering, mileage data being held in more than one place in a vehicle, and the central role MOT garages will play in recording mileage have been recognised in the Consultation response, yet there is no clear plan of how those risks will be managed on the workshop floor."
It's estimated that the changes will raise £1.8 billion per year in revenue by 2031, around 80% of which will be reinvested into relevant infrastructure and other EV support measures.
The Government has also tried to ease pressure on the pockets of combustion car drivers by introducing the Fuel Finder scheme to help people find the cheapest fuel. However, its implementation has left a lot to be desired; recent What Car? research found that drivers could be losing £260 per year due to out-of-date pricing on fuel finder apps, of which four out of five were found to be inaccurate.
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