Update to 'pay per mile' change as Department for Transport responds

The government has issued a new ‘pay per mile’ tax update after being questioned by an MP on potential plans. With the rise of electric vehicles which don’t use petrol or diesel, which is taxed, it is widely thought that the government is drawing up plans for a new system of taxing people based on mileage to cope with the inevitable drop in revenue.

While the government has not officially confirmed the introduction of a pay-per-mile system, some early estimates suggest that drivers could be charged up to 15p per mile. For the average UK motorist driving 7,000 miles a year, this could mean an annual fee of £1,050 - a substantial increase from the current flat rate for electric car users. Thom Groot from the Electric Car Scheme said: “If implemented, this change could significantly impact driving costs for many UK motorists.

"It’s particularly concerning for those in rural areas who rely heavily on their vehicles for daily activities, as well as younger drivers who are already facing high motoring costs.” In a new question Labour’s Andrew Ranger asked Chancellor Rachel Reeves: “Whether the Government is considering proposals to replace Vehicle Excise Duty (VED) with a pay-per-mile road pricing system.”

Officials from the Treasury refused to be drawn on pay-per-mile but did confirm that at this stage there are ‘no plans’ to abolish Vehicle Excise Duty. Answering for the Treasury Dan Tomlinson said: “The Government has no plans to abolish Vehicle Excise Duty (VED).

"VED applies to vehicles used or kept on public roads, which does not vary by miles driven. However, fuel duty applies to the petrol or diesel used by motorists driving internal combustion engine vehicles; the greater the miles driven, the more fuel duty incurred.”

Earlier this summer a survey showed increasing support from motorists, with Auto Express finding that British drivers believe a pay-per-mile system may be the fairest way to get all users to pay for upkeep of the roads. Around 42 per cent of motorists across the UK are now in favour of having the new system of Vehicle Excise Duty (VED) be a pay-per-mile model.

Edmund King, AA President, has suggested schemes could be introduced to help rural drivers, including a certain allowance of “free miles”. The RAC advised: “As more electric vehicles come on to the road, a replacement tax system will be needed to ensure the Government doesn’t lose too much money and that EVs pay for their use of the roads.

“We have said consistently that whatever any new taxation system looks like, the most important thing for us is that it’s simple and fair to drivers of both conventional and electric vehicles. We don’t want to see any additional taxation of drivers.

"We’d also like to point out that fuel duty – currently 53p a litre – is already effectively a tax per mile for drivers of petrol and diesel vehicles, the only variable is how fuel efficient a car is. As fuel duty isn’t printed on receipts, it’s not very obvious how much tax we’re paying every time we fill up.

“At the moment we calculate a driver with a 40mpg car is paying 6p per mile in fuel duty, but crucially this works out to be far more as VAT is then added on top of that and the retailer’s margin. There is clearly much work to be done on this which is why we were encouraging the Government to start thinking about it now.”