Government considering new tax on EV drivers in Budget
Electric vehicle (EV) drivers could face a new tax in next month’s Budget.
The BBC understands there are “talks” within the government about the possibility of a new tax on electric vehicles, with pressure on the chancellor to find tens of billions of pounds of additional revenue.
A government spokesman told the BBC: “Fuel duty covers petrol and diesel but there is no equivalent for electric vehicles. We want a fairer system for all drivers.”
The explanation is as follows: A report in the Daily TelegraphHe said the budget would include a new pay-per-mile charge for electric vehicles.
EV drivers could be charged 3p per mile on top of other road taxes, costing an extra £12 on a journey from London to Edinburgh, according to the Telegraph. Hybrid car drivers will also be charged, but at a lower rate.
The idea is that property owners should estimate road use for the coming year and pay for it, the newspaper says. If they had driven fewer miles at the end of the year they would have a credit to carry over, but if they had driven more they would face an additional charge.
Drivers of petrol and diesel vehicles pay fuel tax, so the switch to electric vehicles leaves a gap in government revenues, which are already under significant pressure.
As of April this year, the exemption of electric cars from vehicle SCT has ended due to the amendment made in the 2022 Budget.
“While we support the transition to electric vehicles, we want a fairer system for all drivers,” a government spokesman told the BBC.
“It is right to want a tax system that fairly funds roads, infrastructure and public services,” they added.
But the government still supports a move away from petrol and diesel, officials said, noting the £4bn of support already provided, including grants to reduce upfront costs of up to £3,750 per eligible vehicle.
“We will look at further support measures to make owning an electric vehicle more convenient and affordable,” they said.
Concerns are growing about the “tax gap” resulting from more petrol and diesel cars coming off the roads.
This brought pay-per-mile systems to the fore, but there was pushback from some quarters.
AA chief Edmund King said the government “needs to tread carefully unless its actions slow the transition to electric vehicles” as it loses fuel tax revenue.
He added that car sales showed the government’s own zero emissions target would not be met this year and details of the proposal were needed “to determine whether these new taxes would be fair or a poll tax on wheels”.
