Electric vehicle (EV) drivers could face a new tax in next month’s Budget.
With pressure on the chancellor to find tens of billions of pounds in additional revenue, the BBC understands there have been “talks” within the government about the possibility of a new tax on electric vehicles.
A government spokesperson told the BBC: “Fuel tax covers petrol and diesel, but there is no equivalent for electric vehicles. We want a fairer system for all drivers.”
The statement follows a report in the Daily Telegraph that the budget would include a new pay-per-mile charge for electric vehicles.
According to the Telegraph, electric vehicle drivers could be charged 3p per mile, on top of other road taxes, equating to an extra £12 on a trip from London to Edinburgh. Drivers of hybrid cars would also pay, but at a lower rate.
The document says the idea is that property owners would have to estimate and pay for road use over the next year. If, at the end of the year, they had driven fewer miles, they would have a credit to carry over, but if they had driven more, they would face an additional charge.
Drivers of gasoline and diesel vehicles pay fuel taxes, so the transition to electric vehicles leaves a shortfall in government revenue, which is already under significant pressure.
Since April of this year, electric cars are no longer exempt from vehicle excise duty, due to a change made in the 2022 Budget.
“We want a fairer system for all drivers while supporting the transition to electric vehicles,” a government spokesperson told the BBC.
“It is correct to seek a tax system that fairly finances roads, infrastructure and public services,” they added.
However, the government still supports the transition away from petrol and diesel, they said, noting that £4bn in support has already been provided, including grants to reduce upfront costs by up to £3,750 per eligible vehicle.
“We will study new support measures to make electric vehicle ownership more convenient and affordable,” they said.
There has been growing concern about the emerging “tax gap” due to more petrol and diesel cars coming off the roads.
This has put pay-per-mile systems in the spotlight, but there has been pushback from some quarters.
Edmund King, president of the AA, said that while the government was losing fuel tax revenue, it should “tread carefully unless its actions slow the transition to electric vehicles”.
He added that car sales indicated the government’s zero-emissions target would not be met this year, and that details of the proposal were needed “to determine whether these new taxes will be equitable or a poll tax on wheels.”
