The Chancellor announced an Electric Vehicle Excise Duty (eVED) charge will be introduced from April 2028 in this week’s Autumn Budget.
It is predicted to raise £1.9billion for the Treasury’s coffers by 2030 and will fill the fiscal hole created by the loss of fuel duty as the UK approaches its 2035 deadline when all new cars must be zero emission.
The road pricing scheme will see EV owners having to pay a ‘modest’ 3p charge for ever mile they drive.
This is on top of the £195-a-year VED standard rate, which was only levied on EVs from April this year.
Plug-in hybrid vehicles (PHEVs) – which have small batteries and can cover up to 90 miles when driven in electric-only mode – will also be hit with eVED at a reduced 1.5p per mile charge to reflect the fact they’re also paying fuel duty on petrol.
Edmund King, OBE, isn’t just the president of the AA; he’s the co-creator, along with his wife, of Road Miles – a ‘fairer’ scheme where drivers drivers benefit from at least 3,000 free Road Miles each year and thereafter pay a small charge of less than 1p per mile. Fuel duty discounts are deducted.
That makes Edmund better placed than most to comment on road pricing.
Here’s his verdict on the Government’s eVED plans – and why he believes pay-per-mile WON’T be rolled out for petrol and diesel car drivers in the future…
Edmund King: A charging system for EVs was inevitable and the government’s system is quite simple and balance but it could have been introduced next year
‘A pay-per-mile charging system for EVs was inevitable’
Some kind of charging system for electric vehicles was inevitable at some stage.
The government takes £25billion in fuel duty from drivers.
And if you look ahead to 2050, where the government’s aspiration is to be net zero, that means fuel duty in 2050 would be zero.
The government needed to look where they could recoup some of that money – for potholes, for roads, and general taxation.
With that premise, we knew something was coming at some stage.
Should the government have waited to announce the measure to stop EV demand stalling?
There are questions about whether announcing a scheme now for three years hence sends out some mixed messages and might put some people off from buying an EV.
People who are hesitant – the costs just about add up for them but they’re a little bit uncertain – could hear about pay-per-mile and be put off.
As the scheme is not due to start for around three years, it could be argued that the government could have waited another year and talked about it next year.
That still would have given them two years to implement it.
Why pay-per-mile is a good idea
The scheme that the government has come up with is quite clever. It is quite simple and it is quite balanced.
People have been talking about road pricing or pay-per-mile since the Smeed Report in 1964 [a study into alternative methods of charging for road use, commissioned by the UK government between 1962 and 1964 led by R.J Smeed]. Politically, it’s very contentious.
Labour’s managed to come up with a simple scheme that doesn’t invoke problems about privacy, or indeed, expensive infrastructure, cameras, technology.
Additionally, 3p-a-mile is a reasonable rate to start it off in three years’ time, if you bear in mind that fuel duty is 6p-a-mile.
Fuel duty will go up in the next three years. So, at 3p per mile, road pricing will still be less than half the cost per mile of fuel duty.
There will still be an advantage to driving an electric vehicle – part of the objective is to encourage greener, cleaner motoring and you still must have an incentive.
AA President Edmund King says that levying pay-per-mile taxation on plug-in hybrids is flawed
Does pay-per-mile work for plug-in hybrids?
The Treasury’s sums are more questionable with plug-in hybrids.
The rate for plug-in hybrid is 1.5p per mile. Many PHEVs will do around 50 miles on electric and the rest on petrol.
Take someone doing a journey of 150 miles: you will only get the benefit of electric for 50 miles but you will pay 1.5p for 150 miles and you will pay fuel duty for 100 of those miles.
Many people will question whether it is worth opting for a plug-in hybrid when this comes in – yet we’ve always said they are a good stepping stone into electric.
The Treasury told the AA that they aren’t trying to put people off PHEVs, but one can question that.
How will eVED work in reality?
Calling pay-per-mile eVED (electric Vehicle Excise Duty) is a smart move because the payment methods will be similar to existing Vehicle Excise Duty.
Cars over three years old have to go for an annual MOT anyway. As an MOT currently checks mileage this new check for EVs is relatively easy.
The questions will come for cars under three years of age.
Will they really have to go to an MOT center that tend to be very busy anyway?
The AA for instance could step in here and use our 3,000 on-road patrols to check mileage.
New connected car technology could be another solution; in the future you could have an app in your car that links up with DVLA. But obviously you have to safeguard privacy.
Could pay-per-mile incentivise people to cut down on driving?
If you’ve estimated that your mileage is say 8,000 miles a year – £240 per annum in eVED charges – and then in November, you’re at 7,500 miles and you’re getting close to your estimated 8,000 miles some drivers might start thinking about their journeys.
People might asks themselves: do I really want to make those long journeys?
It might reduce some journeys because it concentrates the mind.
King believes pay-per-mile won’t be rolled out to petrol and diesel vehicles, which already pay almost 52p-a-litre in duties at the pumps
Is EV pay-per-mile a Trojan horse? Will it be introduced for all cars?
Ironically, petrol and diesel vehicles are already charged in this way – fuel duty is a per mile taxation.
In effect, the government doesn’t need to bring in road pricing for all vehicles. Fuel duty is going up in supplements from September 2026 anyway.
Why would the government need to bring in road pricing for all vehicles when they’ve already got a source of revenue that is easy to collect?
I’m not sure that this is road pricing by the back door. I think it is a way to ensure that electric vehicles pay their way.
How could the government ensure road pricing is fair in the future?
What you don’t want in the future is for the price per mile for electric vehicles to be ramped up above inflation.
This is where there would be calls for an independent body to be brought in to make sure payment is fair and to ensure that a proportion of that money goes into road maintenance.
An independent body could illustrate exactly where the money’s going so people can see an improvement on the roads.
All AA surveys show 96 per cent of drivers say potholes and road maintenance is their number one issue.
Another benefit would be for some of the money to go towards the public charging infrastructure. Or to ring fence a certain amount to provide solutions for people who don’t have home charging.
Is being taxed to drive an electric vehicle abroad fair?
Paying 3p per mile to drive abroad does appear to be somewhat unfair, because you’re not using UK roads.
In addition, you might be paying tolls.
But if you had to have an extra check on the mileage of your car going in and out of say, Dover and Folkstone, it could be a bit of a bureaucratic nightmare.
The government’s system isn’t using sophisticated technology so it would be difficult at the moment to discount the miles driven abroad.
Perhaps in the future when the system relies more on in-car technology it would be possible to discount for drivers going abroad, but currently it would be problematic.
Certainly, in the shorter term, we just have to put up with and pay for it.
Will EV uptake be stalled?
The Office for Budget Responsibility (OBR) initially said that there would be 440,000 fewer EVs sold in the next five years.
However, the Treasury pointed out that once that is mitigated with the extra £1.3bn in the Electric Car Grant and salary sacrifice, etc, that comes down to 120,000 fewer EVs in the next five years.
But the Treasury is admitting that having a pay-per-mile scheme will deter some sales of EVs – and there is a certain irony there.
What about people who share cars? Or get lifts? How will the cost of pay-per-mile be shared?
That’s a very, very valid question.
I think that it will be a consideration because quite a few families share cars.
For instance parents who’ve estimated a 5,000-a-year mileage might not want their teenagers to use the car if the mileage towards the end of the year is already 4,800.
People will have to manage their mileage and work it out.
And with an electric car, it is more complex to split the cost when lift sharing than with a petrol car – there’s a massive difference between whether you charged at home or whether you stopped on the motorway.
If you are car sharing do you split the costs at that higher rate or not?
How will EV Tax Rebate schemes like some Chinese EV makers are introducing help buyers?
Chinese sister brands Omoda and Jaecoo have introduced an ‘EV Tax Rebate’ on their Omoda E5 and Jaecoo E5 EVs, equivalent to 20,000 miles at 3p per mile.
The saving can be used immediately on vehicles purchased through their joint retailer network even though the Treasury’s EV road pricing tax doesn’t come into effect for another three years.
We brought this idea into our Road Miles concept almost 10 years ago: Manufacturers with new cars could give a certain amount of free road miles – an incentive to sell cars.
There are marketing opportunities for some of the manufacturers. We do see it a bit – some manufacturers give away free petrol for 6 months or similar.
So, we might see more of this with eVED – manufacturers we will pay your mileage for the first year to encourage people to buy their EVs.
It’s valid marketing to sell products.
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