Pay-per-mile road plans 2025 update as government issues response | Personal Finance | Finance

The government has released a pay-per-mile update amid concerns there could be a major change in the November Budget. Speculation is mounting that Chancellor Rachel Reeves will impose a 3p per mile charge on all electric vehicles.

Reports have suggested that the government has moved to combat the decline in revenue as the rise of electric vehicles means fuel tax revenues will fall. Those traveling 8,000 miles a year can expect to pay an additional £240 a year in tax if the 3p/mile system is introduced.

People who own gasoline and diesel vehicles pay taxes when purchasing fuel, while electric vehicle owners can avoid such fees. According to the Office for Budget Responsibility, standard petrol and diesel duties are currently 52.95p per litre, which is a tax people pay at the petrol pump on top of VAT.

A new parliamentary question asked what might happen if pay-per-kilometre pricing was introduced and did not specify only electric vehicles (even peytol and diesel ones). Tory Richard Holden asked Rachel Reeves: “What assessment did she make of the potential impact of pay-per-mile road pricing on (a) rural motorists, (b) low-income motorists and (c) small businesses?”

Chancellor of the Exchequer Dan Tomlinson said the system was ‘under review’ and any changes would be announced at ‘financial events’: “Fuel duty is forecast to rise by £24.4bn in 2025/26 and remain the same. In the Autumn Budget 2024, the Government announced continued support for people and businesses by extending the temporary 5p fuel duty cut and canceling the planned rise in line with inflation in 2025/26.”

“The Chancellor meets regularly with his Ministerial colleagues to discuss a wide range of issues. The Government is keeping the tax system under review, with announced changes to fiscal activities.”

Chancellor Rachel Reeves will unveil a policy to introduce a 3p per mile tax on electric vehicles when she delivers her Budget on November 26, the Daily Telegraph reports. According to the newspaper, the plan will be introduced in 2028 following consultation and will cost EV drivers an average of £250 a year.

Automobile groups have expressed concern that such a tax could deter some people from switching to electric cars. The Treasury will face a reduction in revenue from fuel duty as more drivers switch from petrol or diesel vehicles to electric vehicles.

Fuel duty raised just under £25bn in the 2024/25 financial year. Successive governments have found the prospect of introducing per-kilometre charges for driving, sometimes called road pricing, too politically toxic.

The Daily Telegraph said Ms Reeves’ EV plan would involve users predicting how far they will drive over the next 12 months and paying an extra fee on top of vehicle excise duty (VED).

If they drive more they will need to top up this amount, plus if someone drives fewer miles some of the money will be carried over to the next year. Examples of journeys costing 3p per mile include £12 between London and Edinburgh, £5 between Cambridge and Bristol and £2 between Liverpool and Leeds.

The VED exemption for electric vehicles was removed in April. A Government spokesman said: “Fuel duty covers petrol and diesel but there is no equivalent for electric vehicles.

“As we support the transition to electric vehicles, we want a fairer system for all drivers, which is why we’ve invested £4 billion in support, including grants that will reduce up-front costs by up to £3,750 per eligible vehicle.

“Just as it is right to seek a tax system that fairly funds roads, infrastructure and public services, we will look at further support measures to make owning an electric vehicle more convenient and more affordable.”

AA chief executive Edmund King acknowledged the Treasury faces losing fuel tax revenue but urged the Government to “tread carefully” to avoid slowing the switch to electric vehicles.

He said: “We need to see the details of this proposal to determine whether these new taxes would be fair or a freewheeling tax.”

Steve Gooding, director of automotive research charity the RAC Foundation, said the Treasury’s “fuel tax cash cow” was about to end. He continued: “If the Chancellor is inclined to introduce distance charges for electric vehicle drivers but still encourages the uptake of electric vehicles, then he needs to look at how he can reduce the cost of public charging for the millions of people who do not have the option of charging their cars at home.”

Snap polling by YouGov showed Britons tend to support the idea of ​​a pay-per-mile tax for electric vehicles. A Nov. 6 survey of 5,833 adults in Great Britain found that 43 percent of respondents “strongly support” or “somewhat support” the idea, while 34 percent either “somewhat oppose” or “strongly oppose.” Approximately 23% “don’t know.”

YouGov also found that older people tend to favor the idea more than younger people.