RAC Issues Alert Over Upcoming £240 Car Tax Increase for Electric Cars
The RAC has raised concerns about a new car tax charge set to take effect from April 2028, which will impact drivers of electric and plug-in hybrid vehicles. According to the roadside recovery group, a pay-per-mile system known as eVED will be introduced, leading to higher taxes for these drivers.
Details of the New Pay-Per-Mile Tax System
Under the new regulations, electric car drivers will be charged 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. The government estimates that the average electric car driver, covering 8,000 miles annually, will face an additional £240 per year on top of the existing Vehicle Excise Duty (VED) rates.
Industry Reactions and Concerns
In response to the Budget announcement, Jon Lawes, managing director of Novuna Vehicle Solutions, expressed apprehension. He stated, "New costs for EV drivers risk undermining confidence just as the Government allocates substantial additional funding for the electric car grant scheme." Lawes highlighted that electric vehicles have only recently lost their VED exemption, and while raising the Expensive Car Supplement threshold to £50,000 is positive, the pay-per-mile charge effectively creates a VED-plus system.
Lawes further commented, "The new subsidies are welcome, but set against these tax changes, it still feels like one step forward and two steps back. If the government is serious about reaching its ZEV mandate targets, it must address fundamental issues such as high upfront costs, inconsistent charging access, and higher prices for drivers without home charging." He warned that without a coherent strategy, subsidies might be negated by inconsistent policies, slowing the transition to electric vehicles.
Impact on Fleet Operations and Sales
David Bushnell, director of consultancy and strategy at Fleet Operations, described the new pay-per-mile charge as "particularly concerning." He explained that this increase elevates the lifetime cost of owning an electric vehicle and, by the government's own admission, could result in approximately 440,000 fewer electric car sales over the forecast period. This reduction in demand may destabilise used vehicle values.
Bushnell noted, "Movement on the expensive car supplement threshold, from £40,000 to £50,000, offers some limited relief, but at the same time, it will unnecessarily penalise used buyers, with some nearly identical used vehicles being treated differently, purely based on the registration date." He concluded that these measures collectively make electrification more challenging, sending mixed signals to businesses ready to invest in cleaner vehicles and highlighting an imbalance between fiscal tightening and sustainable transport investment.
