New pay-per-mile tax for EV drivers poses a ‘serious risk’ to the industry

EV drivers will face a new pay-per-mile road tax, following an announcement in the Autumn Budget.

John Murray, Head of Electric Vehicles at LCP Delta, said:

“The Government’s decision to introduce a £0.03-per-mile tax for EV drivers poses a serious risk to the industry. It makes the switch to electric vehicles less attractive and risks hardening public scepticism at a critical moment for mass adoption.

“LCP Delta’s forecast shows that with more than 3.2 million fully electric cars on the road by April 2028, each driving an average of 8,500 miles, the Pay-Per-Mile tax would raise around £0.82 billion a year. That is around half the revenue that would have been generated if those same vehicles were traditional petrol or diesel cars paying fuel duty. The message is clear: while the tax generates some income, it falls far short of replacing collapsing fuel-duty revenues from declining ICE sales.

“However, the bigger concern is what this does to public behaviour. By imposing a new running cost on EVs, this policy risks stalling Battery EV adoption by making ICE or Plug-in Hybrid EV ownership look more financially attractive. That cuts directly against the UK’s decarbonisation strategy.

“If the Government is serious about maintaining EV growth while addressing the fiscal shortfall, a smarter, more balanced approach would have been to focus on fuel duty for ICE vehicles. The temporary 5p cut introduced in 2022 is already scheduled to end in March 2026, returning to its previous level. Building on that, for example, by implementing a modest inflationary-aligned uplift on petrol and diesel levies, which have been frozen for over a decade, would have raised significantly more revenue and maintained a clear incentive to switch to electric.

“Instead, today’s announcement creates a contradictory policy landscape: 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.”