The UK automotive industry is strongly opposing the government’s proposed pay-per-mile tax on electric vehicles (EVs), warning that the policy could reverse recent gains in EV adoption and destabilize the sector. The new tax, set to be detailed in Chancellor Rachel Reeves’s Autumn Budget, aims to offset lost revenue from traditional fuel duties as drivers shift to electric.
Tax Details and Concerns
Under the proposed scheme, EV drivers will face a levy of 3 pence per mile driven, in addition to the existing £195 annual vehicle excise duty (VED). This means an average EV driver covering 8,000 miles per year would incur an extra £240 in annual charges—costs that did not exist last year.
The Society of Motor Manufacturers and Traders (SMMT) has condemned the tax as “entirely the wrong measure at the wrong time,” arguing it undermines efforts to encourage EV uptake. The industry fears the policy will discourage potential buyers, making the government’s own zero-emission vehicle (ZEV) mandate—which requires automakers to increase EV sales to 80% by 2030—significantly more difficult and expensive to achieve.
Government Support and Contradictions
The government has simultaneously announced positive measures for the automotive industry, including a £2.5 billion innovation fund, favorable trade deals with the US and India, and adjustments to the ZEV mandate framework. However, the SMMT warns that the pay-per-mile tax threatens to negate these benefits.
Implementation Timeline and Industry Impact
The tax is planned for implementation in 2028, pending a public consultation. The SMMT estimates that this policy could wipe out recent growth in the EV sector, potentially losing 400,000 EV sales. The industry argues that singling out electric cars for additional taxation sends a discouraging message to consumers and makes the transition to EVs less attractive.
The core issue is revenue replacement. As gasoline and diesel sales decline, governments must find new ways to fund infrastructure and public services. While a pay-per-mile system seems logical from a tax perspective, its immediate impact could stifle EV adoption, delaying the broader shift to electric mobility.
The government’s conflicting signals—encouraging EV sales while simultaneously increasing their cost—create uncertainty for both automakers and consumers. Unless reconsidered, this tax risks undermining the UK’s long-term decarbonization goals.
