Labour’s new pay-per-mile road tax to clobber businesses, ministers admit
Ministers have admitted Labour’s new pay-per-kilometre tax on fully electric and hybrid vehicles will disrupt businesses.
An internal government impact assessment acknowledges that the tax, which is part of the drive to achieve Net Zero, will affect around 5.6 million vehicles and that the ‘impact will be material’ on some firms.
Although it did not put a figure on the potential impact, it is another blow to businesses following Chancellor Rachel Reeves’ Employers’ National Insurance rise, inflation-busting increases to the minimum wage and sky-high energy costs, and changes to employment law already expected to cost businesses £5bn.
Critics have warned that the new tax, known as eVED, threatens to raise prices even further for consumers as firms look to pass on any increases in costs.
Ministers said yesterday they would push ahead with proposals to charge electric vehicle owners 3p per mile to ensure they make a ‘fair contribution’ to road maintenance costs. Plug-in hybrid drivers will also be charged 1.5p per mile.
The new tax will be introduced from April 2028 and the typical electric vehicle driver is expected to pay around £240 a year.
This charge is on top of road tax, which is around £200 for most vehicles and £600 a year for the first five years for cars priced at £40,000 or more, which includes many electric and hybrid models.
Howard Cox, founder of the FairFuelUK campaign, said: ‘Ministers have now been forced to admit Labour’s new pay-per-mile road tax on electric and hybrid vehicles is another blow to British businesses.
Once again, businesses and ultimately consumers will pay the price for Labour’s tax-raising agenda. This hidden tax on greener vehicles shows that this government does not understand the pressures faced by companies trying to remain competitive.’
Ministers claim the crackdown is needed to offset a projected fall in fuel tax revenues as petrol and diesel are phased out and sales of new petrol and diesel cars are banned from 2030.
Currently, fuel duty raises more than £25bn a year.
But businesses investing in electric vehicle and hybrid fleets will be hit particularly hard after being encouraged by ministers, the internal impact assessment revealed today says.
He says: ‘For some businesses, particularly large fleets, the impact will be significant.
‘One-off costs for businesses are expected to include updating processes to estimate the mileage of their vehicles and pay eVED.
‘We also expect there will be ongoing costs for businesses, including the introduction of new systems to estimate and pay eVED.’
Chancellor Rachel Reeves announced the pay-per-kilometre tax in the Budget last November.
Treasury was contacted for comment.
