Millions of UK drivers are set to encounter a significant shift in how they are taxed for using the roads, with the government confirming the introduction of a new pay-per-mile system.
Chancellor Rachel Reeves will launch the new VED+ scheme from November 26, according to widespread reports. This policy represents one of the most substantial changes to motoring taxation in years.
The Rationale Behind the New Tax
The move is driven by the need to address a looming financial shortfall as drivers transition away from traditional petrol and diesel cars. Professor ManMohan Sodhi, Professor of Operations and Supply Chain Management at Bayes Business School, explains the government's reasoning.
He stated that taxes are "rational" in this context, highlighting that fuel duty currently brings in £24.4 billion annually. This revenue would be lost if all drivers switched to electric vehicles.
Professor Sodhi also pointed out that pure EVs and plug-in hybrids are often heavier and cause more road damage than conventional cars. He added that with petrol and diesel drivers already paying around 7p per mile in tax, a 3p rate for electric vehicle drivers is not unreasonable.
How the Pay-Per-Mile System Will Work
The most controversial aspect of the new VED+ system is the proposed method for tracking mileage. The government is considering the use of monitoring devices, or 'black boxes', fitted to cars to record the number of miles driven.
This has raised significant privacy concerns and has been acknowledged as a "politically fraught" issue by Professor Sodhi. The devices would be central to calculating the 3p per mile charge for electric vehicles.
Industry Backlash and Policy Concerns
The announcement has been met with criticism from within the electric vehicle industry. Melanie Lane, Chief Executive of Pod Point, one of the UK's largest EV charging providers, has spoken out strongly against the proposal.
She argued that the new tax risks punishing those who are making the switch to cleaner transport, undermining the government's own environmental goals. Ms Lane described it as a clear case of "feeding with one hand while taking away with the other," which could damage driver confidence just as EV adoption is accelerating.
Government's Stance on a Fairer System
In response, a Government spokesperson defended the policy, stating that a "fairer system" of motoring taxation is necessary for all drivers. They emphasised the need for a system that continues to support the transition to cleaner vehicles while fairly funding roads, infrastructure, and public services.
The spokesperson also indicated that the government would look at further support measures to make owning electric vehicles more convenient and affordable, suggesting that the new tax is part of a broader, albeit complex, strategy.
