Electric Vehicle Owners to Encounter Pay-Per-Mile Tax
Electric vehicle (EV) owners in the UK may face a new pay-per-mile tax starting from the 2028-29 financial year. This measure aims to create a sustainable revenue stream as the nation shifts towards electric transportation.
Impact of the Pay-Per-Mile Tax on Electric Vehicle Owners
According to estimates, an electric vehicle driver covering 8,500 miles will incur approximately £255 in taxes. This amount is projected to be about half of what traditional petrol and diesel drivers pay in fuel tax. The Office for Budget Responsibility (OBR) anticipates that this new per-mile charge will generate £1.1 billion in 2028-29, increasing to £1.9 billion by 2030-31.
Potential Sales Decline
However, the revenue from this tax may vary based on the uptake of electric vehicles in the coming years. The OBR noted that the actual yield from the tax remains uncertain and may fluctuate depending on consumer behavior.
- New electric or hybrid vehicle sales will be mandated by 2030.
- A ban on new petrol and diesel cars will take effect in the same year.
- Predicted decline in EV sales is around 440,000 units due to the new tax.
- Government initiatives could potentially mitigate about 130,000 of these sales losses.
Concerns from Industry Experts
Industry experts express concerns that the new pay-per-mile tax could diminish the appeal of electric vehicles. The OBR indicated that higher lifetime costs associated with this charge might deter potential EV buyers.
In response to declining demand, manufacturers might need to consider adjusting their pricing strategies or scaling back the production of non-electric vehicles. Overall, the tax could lead to total revenues falling short by about £200 million by 2030-31 due to reduced sales and shorter driving distances.
This evolving landscape for electric vehicle ownership underscores the need for a careful balance between fostering EV adoption and implementing sustainable taxation policies.
