Ministers in the United Kingdom have acknowledged that a new pay-per-mile road tax on fully electric and hybrid vehicles will negatively impact businesses. An internal government impact assessment indicates the levy, part of the Net Zero initiative, will affect approximately 5.6 million vehicles and that the "impact will be material" for certain firms.
This new tax, known as eVED, is slated to be introduced in April 2028. Electric vehicle owners are projected to pay around £240 annually, while plug-in hybrid drivers will be charged 1.5 pence per mile. This charge is in addition to existing road tax, which is approximately £200 for most vehicles but rises to £600 for the first five years on cars costing £40,000 or more, a category that includes many electric and hybrid models.
The government asserts the tax is necessary to compensate for projected decreases in fuel duty revenue as petrol and diesel vehicles are phased out, with new sales of such cars banned from 2030. Currently, fuel duty generates over £25 billion annually.
Critics, including Howard Cox, founder of the FairFuelUK campaign, argue that the tax will place an additional burden on businesses and ultimately consumers. Cox stated that the levy demonstrates a lack of understanding of the pressures facing companies attempting to remain competitive.
The internal assessment specifically highlights that businesses with large fleets of electric and hybrid vehicles, which they were encouraged to adopt, will face significant financial consequences. The assessment notes that one-off costs for businesses will include updating processes to track and pay the eVED. Ongoing costs are also anticipated as companies implement new systems for mileage estimation and payment.
Chancellor Rachel Reeves initially announced the pay-per-mile tax in the Budget last November. The Treasury has been contacted for comment.