EV pay-per-mile tax could cost UK economy up to £4.8bn

Coalition of BEAMA, EVA England, ChargeUK and REA call on government to delay eVED

Bringing in the Electric Vehicle Excise Duty (eVED) in 2028 could cost the UK economy up to £4.8 billion under worst-case scenarios, according to the trade association for the electrical sector, BEAMA.

Delaying the introduction of Vehicle Excise Duty on electric vehicles until 2030 would protect sales of EVs as no new petrol or diesel vehicles would be on sale. However, the cost of eVED would exceed the total revenue the new tax policy is forecast to raise by 2031, which is around £4.3 billion.   

The forecast is based on BEAMA research which shows that if EV sales collapse at a similar rate to when New Zealand introduced a pay-per-kilometre tax (>50% decline), and sales are not replaced by petrol or diesel cars, the Treasury could lose £4.8bn in 2028 and potentially more in 2029. 

A loss of £4.8bn represents a worst-case scenario, whereby the eVED forces people and companies to delay EV purchases without buying a petrol or diesel alternative. If, however, the eVED prompts all potential EV purchases to be replaced with petrol-powered and diesel-powered car purchases, the result would still cost the UK economy £890m in lost tax receipts and compliance costs, in the first year alone: £630m in lost VAT receipts and £260m in compliance for car leasing companies.  

BEAMA is joined in calling out the fiscal contradictions in the current policy by electric vehicle drivers’ association EVA England, the chargepoint operators’ association ChargeUK and REA, a not-for-profit trade association, representing green businesses.

The coalition – representing EV charging providers, manufacturers, leasing firms, driver groups, investors and insurers – argues that introducing the tax in 2028 will damage consumer confidence, suppress demand and create unworkable conditions for leasing companies and fleet operators. 

The partners has written to Daniel Tomlinson MP, exchequer secretary to the Treasury to highlight how the introduction of this tax in 2028 will also delay planned investments in the charging sector.

Matt Adams, head of electrical transport systems at BEAMA, said: “Introducing the pay-per-mile policy early is a fiscal own goal. It will slow EV uptake, reduce EV charging investments, and cost the UK economy more than the treasury stands to raise with the taxation. A delay to 2030 would provide essential stability at a critical point in the EV transition. Manufacturers in the EV supply chain need a clear message from government to continue investment into local communities and the wider UK economy.” 

Vicky Edmonds, chief executive of EVA England, said: “eVED must be delayed until the Government can prove the proposals work for drivers. The current proposals risk leaving EV owners out of pocket and eroding confidence amongst those thinking about making the switch to electric, particularly lower and middle-income households and those without access to private charging.” 

Mark Constable, head of transport Policy, REA, said: “The three pence per mile taxation mechanism will create significant aggravation for drivers. The process is simply not fit for purpose, is certainly not scalable, and also opens the system to fraud and unfairness. Consumers shouldn’t tolerate this form of taxation.”   

Jarrod Birch, head of policy and public affairs, ChargeUK, said: “The three pence per mile tax is another contradiction at the heart of government’s EV policy which will impact those who cannot charge at home the hardest. EVs are experiencing a surge of interest as an alternative to rollercoaster petrol prices. Government should be doubling down on the transition by making buying and charging an EV affordable for all.”