The UK government has confirmed its intention to implement an electric vehicle excise duty (eVED) starting in April 2028, requiring electric car owners to pay 3 pence for every mile driven. Plug-in hybrid vehicle owners will pay a reduced rate of 1.5 pence per mile.
The Treasury published its response to a public consultation on the eVED scheme, which saw over 5,000 responses. The tax is intended to mirror the fuel duty paid by owners of petrol and diesel vehicles, as revenues from fuel duty decline due to increasing electric vehicle adoption. The government states the system is necessary to ensure EV and PHEV drivers contribute fairly to public finances.
Mileage Tracking and Inflation Adjustments
A significant development from the consultation is the confirmation that drivers will have the option to use their vehicle's built-in connectivity features to transmit mileage data directly, potentially eliminating the need for manual estimates. This voluntary system would utilize 4G or 5G networks to report mileage.
Furthermore, the Treasury confirmed that the 3 pence per mile rate will be adjusted annually in line with the Consumer Prices Index (CPI) inflation starting from the 2029-30 tax year. This measure aims to maintain the real-term value of the tax. This contrasts with fuel duty on petrol and diesel, which has been frozen for 15 consecutive years and includes a temporary 5 pence per litre cut.
Changes to Original Proposals
The public consultation led to two main adjustments to the initial proposal. Firstly, annual garage-based mileage checks for electric vehicles and plug-in hybrids under three years old, which are exempt from MOT testing, have been removed. Owners of these vehicles will now be expected to provide mileage estimates or opt into data sharing. Secondly, the scheme will allow business users, finance providers, and leasing companies to submit bulk mileage estimates for entire fleets, reducing administrative burdens.
Despite these changes, critics argue that the core policy remains problematic. The British Vehicle Rental and Leasing Association noted that making EVs more expensive to own could hinder their adoption, and that the timing of the tax is still inappropriate.
Concerns Over Mileage Fraud
A major concern highlighted during the consultation is the vulnerability of the eVED system to mileage fraud, commonly known as vehicle clocking. The system's reliance on odometer readings, particularly from MOT tests, leaves it susceptible to manipulation. The availability of devices called 'mileage blockers' or 'mileage freezers' has increased, which can prevent mileage from being recorded by the vehicle's systems. Vehicle history companies estimate that approximately 2.3% of UK vehicles show signs of mileage manipulation.
The government plans to address this by introducing a legal requirement for functioning odometers, creating offenses for tampering, and prohibiting the supply of mileage manipulation devices. Powers will also be granted to authorities to examine vehicles suspected of odometer fraud. However, the Treasury indicated these powers would be used infrequently, relying on cross-referencing with MOT records and algorithms to identify suspicious patterns.
Other Criticisms
Experts also raised issues concerning how eVED liabilities would be attached to vehicles rather than drivers, with mileage credits transferring upon sale. There are currently no provisions for refunds for vehicles declared off the road. The government has ruled out differentiated rates for high-mileage drivers or reduced charges for rural residents, and confirmed that mileage accumulated overseas will count towards the UK tax liability.
Critics have voiced concerns that the pay-per-mile system could become politically challenging and that the DVLA's legacy systems may struggle with essential functions like processing refunds for sold or scrapped vehicles. The Treasury maintains that the eVED design balances the need for a sustainable tax system with incentives for EV uptake.