Chancellor Rachel Reeves is poised to unveil a fundamental overhaul of the UK's driving tax system during her Budget speech this Wednesday.
The Shift to Pay-Per-Mile
The centrepiece of this reform is a new pay-per-mile tax system, which is reportedly being introduced to address a significant shortfall in fuel duty revenue. This deficit has emerged as increasing numbers of British drivers transition to electric vehicles, which are currently exempt from traditional fuel duties.
Under the proposed scheme, electric vehicle (EV) drivers could face a charge of 3p for every mile they drive. For an average motorist covering 10,000 miles per year, this would translate to an additional £300 in annual costs.
Who Will Be Most Affected?
The new tax is expected to have a disproportionate impact on specific groups of drivers. Motorists with longer commutes and those living in rural areas, where public transport alternatives are often limited, are likely to be hit hardest by the changes.
Furthermore, motoring experts have warned that if the system incorporates variable rates based on time of travel, drivers who undertake longer journeys or travel during peak hours could face even greater financial pressure.
Industry Reaction and Concerns
The potential policy has drawn criticism from industry leaders who fear it could disrupt the progress made in electric vehicle adoption. Tanya Sinclair, CEO of Electric Vehicles UK, has urged the government to proceed with caution.
"The Government must take the time to consult properly, design carefully and communicate transparently, a process that will take years, not months," she stated. "Rumours about pay-per-mile only unsettle drivers and risk slowing the very market we need to grow."
Echoing these concerns, Rhydian Jones, a motoring expert at Confused.com car insurance, highlighted the broader societal impact: "Commuters, families, and those living in rural areas who could face higher costs as they take longer and more frequent journeys."
The full details of the proposed pay-per-mile tax system are expected to be confirmed by Chancellor Rachel Reeves in her Budget announcement on Wednesday.
