Rachel Reeves set to hit drivers with road charging tax in the Budget as Chancellor chases fuel duty shortfall
The Chancellor is set to penalize electric vehicle (EV) drivers with a new road tax in the Budget later this month.
Rachel Reeves is expected to announce that electric vehicle owners will be charged 3p per mile on top of other road taxes, Treasury sources told the Mail yesterday.
This means the average driver will pay £250 extra a year by 2028.
Meanwhile, hybrid cars will also face a new but lower fee.
As more and more car owners turn green, the Treasury is reportedly saying the new tax is needed to offset falling fuel duty revenue, and up to six million extra electric vehicles are expected to be on the roads by the time the scheme comes into effect.
Reeves will also argue the move would be fairer as petrol drivers pay an average of £600 a year in fuel duty.
This will also help the Treasury raise an estimated £1.8bn by 2031, helping to close the fiscal gap caused by the green transition due to the loss of revenue from petrol cars.
A pay-per-mile road taxation system has been discussed by governments and industry experts for years, but is often deemed difficult to implement.
Chancellor of the Exchequer Rachel Reeves is expected to announce a new road tax levy for electric vehicles in the budget later this month
The Daily Telegraph reports that the scheme will make them eligible to pay the annual vehicle excise duty (VED), which affects all drivers in the UK, and EV drivers have had to pay the charge since April.
The new element is described as ‘VED+’ and is framed as a way to ensure drivers of green cars pay more each year.
EV drivers will need to estimate the number of miles they will drive in the coming year and pay a fee.
Drivers need not worry if they cannot reach this amount; The money can be carried over to the next year.
If they covered more miles than expected, they would top up their payments.
Repeated surveys have shown that road pricing is very unpopular with motorists and has been branded a ‘poll tax on wheels’, amounting to an extra ‘hidden road tax’.
But critics have warned that any pay raises for drivers due to the contraction in the cost of living would be ‘catastrophic’ and threaten to increase inflation.
Rachel Reeves is expected to announce that electric vehicles will be charged 3p per mile in addition to other road taxes. Meanwhile, hybrid cars will also face a new but lower price.
Conservative Party shadow chancellor Sir Mel Stride said: ‘It would be wrong for Rachel Reeves to target commuters and car owners in this way.’
AA chief executive Edmund King said: ‘Motorists are worried they will become prime targets for increased motoring duties as the Chancellor seeks to raise revenue.
‘Increasing fuel duty in the UK, with global turmoil threatening oil prices at every turn, could be disastrous for the UK economy and motorists dependent on road travel.
‘The danger of increasing car costs further is that it will harm working people, add costs to deliveries and businesses, and ultimately fuel inflation.
‘Budget should not be an excuse for consuming excessive amounts of cash from drivers.
‘A private driver is not a bottomless pit from which authorities can make money whenever they want; Be it taxes, parking charges, congestion charges and fines.’
Simon Williams, the RAC’s fuel guru, said: ‘Our latest research shows that the cost of keeping vehicles on the road has become the most significant financial challenge facing drivers.
‘Although driving is a necessity for many people, costs are increasing. We call on the government not to put money in the pockets of drivers in the budget.’
Concerns have also been expressed that the tax could be expanded to cover all cars.
On top of this, Reeves is also considering scrapping the 5p per liter Fuel Duty cut in this month’s Budget; This will mean a raid of between £2bn and £3bn on struggling motorists.
Sir Mel Stride, the Tory shadow chancellor, told the Daily Telegraph: ‘If you own it, Labor will tax it. It would be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill the black hole she has created in the public finances.
‘With Labour’s cost of living crisis now is not the time to hit hard-working families and businesses with another tax raid.’
