The UK motor industry has responded with caution to reports that the government is considering a pay-per-mile tax on electric vehicles (EVs), expected to be announced in the Autumn Budget and implemented from 2028.
The proposed scheme, which could charge EV drivers approximately 3p per mile, is intended to offset declining fuel duty revenues as more drivers transition away from petrol and diesel vehicles.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The Society of Motor Manufacturers and Traders (SMMT) described the proposal as “entirely the wrong measure at the wrong time,” warning that it could deter consumers from switching to EVs and undermine manufacturers’ efforts to meet zero-emission vehicle (ZEV) targets.
John Cassidy, Managing Director of Close Brothers Motor Finance, echoed these concerns, stating: “While it’s clear that the Government needs to find ways to plug the gaps left by falling fuel duty income, choosing to place the burden on electric vehicle (EV) drivers seems counterintuitive.” He added that the introduction of such a scheme “could stifle progress” just as EV demand begins to recover.
Martijn Versteegen, CEO and Co-Founder at IMAGIN.studio, highlighted the potential impact on lower-cost EVs: “Our data shows that the most-viewed EVs are smaller, value-driven city cars like the Dacia Spring and Fiat 500 Electric; typically cars that run low mileages. A flat pay-per-mile tax system will not only slow the shift to more affordable EVs, but given their low mileage, it’s unlikely to deliver much revenue to the government.”
AutoTrader’s chief executive Nathan Coe also raised concerns about the effect on consumer behaviour, noting that the tax would erode one of the key advantages of EV ownership: lower running costs. “This kind of takes some of that benefit away,” he said, suggesting that a corresponding increase in fuel duty for internal combustion vehicles “would obviously help” support EV uptake.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe government has stated that the proposed tax is part of a broader effort to create a fairer system for all drivers, and has pointed to £4bn in support already provided to encourage EV adoption, including grants of up to £3,750 per eligible vehicle.
However, industry stakeholders remain sceptical. Many argue that the timing and structure of the proposed tax could risk slowing the transition to electric mobility, particularly among cost-conscious consumers and fleet operators. With the 2030 ban on new petrol and diesel cars approaching, the motor finance sector is urging policymakers to consider the broader implications for affordability, demand, and infrastructure investment.
