The Labour government has firmly committed to introducing a new pay-per-mile road tax specifically for electric vehicles, with the policy set to take effect in April 2028.
Government defends new EV levy
During a recent House of Lords debate, Financial Secretary to the Treasury Lord Livermore defended the controversial plan. He stated the government is focused on "ensuring that motoring taxes cover electric vehicles via a new per-mile levy."
Following the Autumn Budget, a government spokesperson emphasised the decision's necessity. "This is a decision that people have talked about for many years," they said, adding that the previous administration had "ducked it, alongside many other difficult decisions." The current government, they argued, is "taking them head-on to ensure that we are fit and stable for the future."
Industry warns of serious risks to EV adoption
The announcement has drawn sharp criticism from industry experts who fear it will damage the transition to cleaner transport. John Murray, Head of Electric Vehicles at consultancy LCP Delta, issued a stark warning.
"The Government’s decision to introduce a £0.03-per-mile tax for EV drivers poses a serious risk to the industry," Murray said. "It makes the switch to electric vehicles less attractive and risks hardening public scepticism at a critical moment for mass adoption."
LCP Delta's analysis forecasts that by April 2028, there will be over 3.2 million fully electric cars on UK roads. Assuming each drives an average of 8,500 miles annually, the new tax would generate approximately £0.82 billion per year.
However, Murray highlighted a significant fiscal shortfall: this revenue is only around half what would have been collected in fuel duty if those same vehicles were traditional petrol or diesel models.
A "contradictory" policy that could backfire
The core concern for analysts is the potential impact on consumer behaviour. By adding a new running cost to EV ownership, the policy could inadvertently make keeping a petrol, diesel, or plug-in hybrid car seem more financially appealing.
"That cuts directly against the UK’s decarbonisation strategy," Murray stressed. He proposed an alternative approach: focusing on fuel duty for internal combustion engine vehicles. The temporary 5p cut introduced in 2022 is due to end in March 2026, and a modest, inflation-linked increase on frozen fuel levies could raise more revenue while preserving the incentive to switch to electric.
"Instead, today’s announcement creates a contradictory policy landscape," Murray concluded. "The Government is offering incentives with one hand and undermining them with the other. At the very moment when clarity and commitment are needed to accelerate the transition, EV drivers are being sent mixed signals."
The government's move marks a pivotal shift in how road use is taxed in the electric age, setting the stage for significant debate about the balance between raising revenue and achieving environmental targets.
