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Chancellor Rachel Reeves is expected to unveil plans for per mile road charges for drivers of electric cars at the Budget, as she looks to offset a forecast sharp fall in fuel taxes, according to people familiar with the matter.
The plans could involve the introduction of road charges for EVs from 2028 following a public consultation, and could raise about £1.8bn a year for the Treasury by the early 2030s.
One proposal being looked at by the government would result in drivers of EVs facing charges of 3p per mile in addition to other road taxes.
The charges would aim to counteract a long-anticipated drop in government revenue from fuel duty that applies to petrol and diesel, as more motorists ditch cars with internal combustion engines for EVs.
The expected move on per mile road charges for EV drivers by Reeves at her November 26 Budget also appears motivated by her need to fill a fiscal hole estimated at between £20bn and £30bn by the end of parliament.
The average EV driver would pay an extra £250 a year, compared to how the average owner of a petrol or diesel car pays about £600 in fuel duty, the people briefed on the government’s plans said.
Drivers of hybrid cars, which combine electric power with an internal combustion engine, would have lower per mile charges than zero-emission vehicles. The Daily Telegraph first reported the story.
The plans would not involve on-road tracking of EVs, with drivers instead facing annual payments based on estimates of how many miles they expect to travel.
If they drive more miles than estimated, they could pay a top-up fee. Conversely, if they end up driving fewer miles, they could potentially roll them over into the following year.
The government is keen to encourage more people to buy EVs to help with the UK’s climate goals.
“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles,” a government spokesperson said on Wednesday, when asked about the possibility of per mile charges for drivers of EVs.
“We want a fairer system for all drivers whilst backing the transition to electric vehicles.”
But the move will be controversial with many motorists as well as politicians. Sir Mel Stride, shadow chancellor, said it “be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill a black hole she has created in the public finances”.
Recent governments have shied away from upsetting motorists and have repeatedly frozen planned inflation-linked fuel duty increases.
The Office for Budget Responsibility warned last year that the cumulative cost of freezing fuel duty from 2010-11 to 2025-26 had risen to about £100bn.
The government highlighted how it had invested £4bn in support for EVs “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,” the government spokesman said.