EV drivers could face new tax in Budget

Drivers of electric vehicles (EVs) could be facing a new tax in next 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.

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.

There has been growing concerns about the emerging “tax gap” from more petrol and diesel cars coming off the roads.

That has put pay-per-mile systems in the spotlight, but there has been push back from some quarters.

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 that car sales indicated that the government’s own zero emissions target would not be met this year, and that the detail of the proposal was needed “to ascertain whether these new taxes will be equitable or a poll tax on wheels”.