Electric vehicle owners in the UK will have to pay a mileage tax on all distances traveled starting in 2028. Britain’s Chancellor of the Exchequer, Rachel Reeves, made the announcement, as the government seeks to compensate for the drop in gas tax revenue that’s accompanying increasing electrification. That revenue, the argument goes, pays for upkeep of the roads that all vehicles – electric or not - drive on.
According to initial information, fully electric vehicles will have to pay 3 pence per mile (about 5.5 cents CAD per 1.6 km), while plug-in hybrids will be subject to a tax of 1.5 pence (about 3 cents) for the same distance.
It’s estimated that UK residents travel an average of 8,500 miles (nearly 14,000 km) per year, which would result in an annual payment of £255, or about $434 CAD. According to the Office for Budget Responsibility, this measure is expected to raise £1.1 billion in the first year, and £1.9 billion ($3.2 billion CAD) starting in 2030.
According to the same agency's estimates, the loss of fuel tax revenue linked to hybrid and electric vehicles will amount to about 0.6 percent of the GDP in 2030. The revenue collected by the mileage tax would be sufficient to cover the anticipated losses.
Dissenting voices
Unsurprisingly, industry representatives, gathered in the UK's Society of Motor Manufacturers and Traders (SMMT), expressed concern and dissatisfaction with the measure, stating that the mileage tax would "reduce demand, discouraging consumers and making the already ambitious sales targets even more costly and difficult to achieve."
The UK, like many other countries, has set a recommendation to phase out the sales of diesel and gasoline vehicles, in its case by 2030. The government has even committed to providing financial aid of £7,500 to buyers of electric vehicles valued at less than £37,000.
Devil in the details
For now, nothing has been confirmed regarding the method for verifying the vehicles' annual mileage. In New Zealand, where a similar measure was introduced, motorists must pay an annual upfront fee (road use charge, or RUC) of $76 per 1,000 km at the time of their mandatory inspection. A sticker must then be displayed on the vehicle's windshield.
And in case you’re wondering whether such a tax might dampen enthusiasm for EVs, the answer, in New Zealand, is yes. It’s believed the implementation of the RUC has played a significant part in EV sales there dropping by 51 percent, from 21,621 to 10,632.