The UK government’s new pay-per-mile tax on electric cars will also include plug-in hybrid cars, chancellor Rachel Reeves announced in the long-awaited Autumn Budget on Wednesday.
The news was originally revealed within documents released in error by the Office for Budget Responsibility (OBR) ahead of Westminster's announcement.
Those documents also confirmed plans by the government to end the 5p freeze on fuel duty, which will therefore increase for the first time since 2010, make changes to the 'luxury car tax', provide extra cash for the Electric Car Grant (ECG) and much more.
Pay-per-mile tax to hit EV and PHEV drivers
The new pay-per-mile tax – or 'eVED' – is being brought in as part of an effort to claw back lost revenue from the duty imposed on petrol and diesel as motorists transition away from ICE vehicles.
The levy is set at 3p per mile driven in an EV and 1.5p per mile driven in a PHEV. This will come into effect from April 2028.
The OBR forecasts that His Majesty's Treasury will thereby raise £1.1 billion in the 2028-29 tax year, increasing to £1.9bn by 2030-31.
However, “the new charge is likely to reduce demand for electric cars, as it increases their lifetime cost”, said the OBR.
It also forecasts that the new tax will preclude some 440,000 EV sales between now and March 2031.
This will be ameliorated, however, by 320,000 of increased sales as a result of the ECG, which the government announced this July. This figure was adjusted hours after the OBR warned the ECG would account for just 130,000.
The OBR warned that the decrease in EV demand resulting from eVED will make it harder for car makers to satisfy the government’s ZEV mandate. This requires an EV sales mix of 28% this year, rising to 80% by 2030.
As such, it notes that “to meet the mandate, manufacturers would therefore need to respond through lowering prices or reducing sales of non-EV vehicles”.
Speaking in the House of Commons, Reeves said: "Because all cars contribute to the wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive, not just by the type of car they use.”
She claimed this would “double” the road maintenance fund in England “over the course of this parliament”.
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The new pay-per-mile tax for electric and plug in hybrid cars will definitely impact drivers’ choices. It's important to stay informed about a vehicle’s past before buying. I usually check any car using free car history tools to understand mileage, and accident records makes buying much easier and transparent.
Strange/delusionary evaluation of rates?
{hoping Acar's comment done mess up the format of the above, appologies readers if they do, you'd think by now wysiwyg..}By this reckoning above the tax take per mile based on the average milage of 7100, is between 9 and 7 pence per mile [maybe -5% for vat on home electricity], so surely if one is looking to make EV's pay the same as ICE tak take/revenue loss they need between 9 and 7 pence per mile? Why is this incorrect, or is Reeves's 'maths' politically fudged? EV's still being hugely subsidised, PHEV's persecuted and ICE' left alone until they concoct some punitive measure against those on ICE which of course include hybrids.
PHEV' assessment is rather duplicitous, particulalry when a HEV pays nothing, so you need to understand the Pure EV milage and not the unpenalised HEV to be fair and honest, not that goverments are ever honest these days. And as an e.g. my phev is running at about 57% electric which uncludes the HEV element, the 'EV' element is much less, so in my case I see see 50% of the full EV rate rate as rather grossly missrepresented, fraudulent even, in the delerious government's favour, which of course in the case of cars; car tax + [ECS} * vat + ved + milage (fuel duty and *+vat ) *vat , and now this ppm. How on earth can this level of tax on tax on tax be fiscally justifyable, particulalry when compated to ANY other purchases?Thats before you get in individual increased based on CPI yet Gov't increases based on RPI and not the increase rate for both.UK governments simply suck in useful air and produce toxins.
So if I swap my bev bmw i3 for a less efficient one with a range extender I pay less tax? They have about the same range. I'm pretty sure if the range extender failed it would make no difference but I get a discount for just owning a broken petrol engine. Not entirely sure what behaviour this is intended to encourage.