Pay-per-mile road plans 2025 update as government issues response to impact question

The government has issued a pay-per-mile update amid concerns a major change could be made in the November Budget. Speculation has been growing that Chancellor Rachel Reeves will slap a 3p per mile charge on all electric vehicles.

Reports suggested that the government was acting to tackle a fall in revenue because the rise of EVs meaning fuel tax receipts have plunged. Those covering 8,000 miles per year could expect to pay an additional £240 per year in tax if the 3p/mile system is introduced.

People who own petrol and diesel vehicles pay a tax when they buy fuel, whereas electric vehicle owners have been able to avoid such fees. According to the Office for Budget Responsibility, standard petrol and diesel taxes are currently 52.95p per litre, and it's something that people pay at the petrol pump on top of VAT.

A new parliamentary written question has asked what could happen if pay-per-mile pricing was introduced and doesn't specify just electric vehicles - even peytol and diesel ones. Tory Richard Holden asked Rachel Reeves: "What assessment she has made of the potential impact pay-per-mile road pricing on (a) rural motorists, (b) low-income drivers and (c) small businesses."

Exchequer Secretary to the Treasury Dan Tomlinson has now replied that the system was 'under review' with any changes to be announced at 'fiscal events': "Fuel duty is projected to raise £24.4bn in 2025/26 and will remain in place. At Autumn Budget 2024, the Government announced continued support for people and businesses by extending the temporary 5p fuel duty cut and cancelling the planned increase in line with inflation for 2025/26.

"The Chancellor meets with her Ministerial colleagues on a regular basis to discuss a wide range of issues. The Government keeps the tax system under review, with changes announced at fiscal events."

Chancellor Rachel Reeves will unveil a policy to introduce a 3p per mile tax for EVs when she delivers her November 26 Budget, the Daily Telegraph reported. The scheme is set to be implemented in 2028 following a consultation, and would cost EV drivers an average of £250 per year, according to the newspaper.

Motoring groups expressed concern that such a tax could put some people off from switching to electric motoring. The Treasury faces a reduction in revenue from fuel duty as more drivers move from petrol or diesel cars to EVs.

Fuel duty raised just under £25 billion in the 2024/25 financial year. Successive governments have found the prospect of introducing per-mile charges for driving - sometimes referred to as road pricing - too politically toxic.

The Daily Telegraph said Ms Reeves's EV scheme will involve users estimating how far they will drive over the following 12 months, and making an extra payment on top of vehicle excise duty (VED).

If they drive more they will need to top up this amount, while some of the money would carry over to the next year if someone clocks up fewer miles. Journey examples of a 3p per mile fee include £12 between London and Edinburgh, £5 between Cambridge and Bristol, and £2 between Liverpool and Leeds.

EVs' exemption from VED was removed in April. A Government spokesperson said: "Fuel duty covers petrol and diesel, but there's no equivalent for electric vehicles.

"We want a fairer system for all drivers whilst backing the transition to electric vehicles, which is why we have invested £4 billion in support, including grants to cut upfront 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 electric vehicles more convenient and more affordable."

AA president Edmund King acknowledged that the Treasury faces losing fuel duty revenue, but urged the Government to "tread carefully" to avoid slowing the transition to EVs.

He said: "We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or a poll tax on wheels."

Steve Gooding, director of motoring research charity the RAC Foundation, said the Treasury's "fuel duty cash-cow" is coming to an end. He went on: "If the Chancellor is tempted to go down the route of introducing a distance charge for EV drivers but still encourage EV take-up, then she needs to look at how to cut the cost of public charging for the millions of people who don't have the option to charge their cars at home."

Snap polling by YouGov has shown that Britons tend to support the idea of a pay-per-mile tax for EVs. A survey of 5,833 adults in Great Britain carried out on November 6 found that 43% either "strongly support" or "somewhat support" the idea, while 34% either "somewhat oppose" or "strongly oppose" it. Some 23% "don't know".

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