UK Introduces Pay-Per-Mile Tax on Electric Vehicles to Offset Fuel Duty Loss

Britain plans to implement a pay-per-mile tax on electric and plug-in hybrid vehicles from April 2028. The initiative aims to compensate for anticipated fuel duty revenue losses as the nation transitions to cleaner vehicles. The tax intends to balance the cost of road maintenance among all vehicle owners.

In a bid to offset projected losses in fuel duty revenue, Britain will introduce a pay-per-mile tax on electric and plug-in hybrid vehicles starting April 2028. Finance Minister Rachel Reeves revealed the charges in her budget announcement, setting rates at 3 pence per mile for electric cars and 1.5 pence for hybrids.

This new tax targets an estimated 1.1 billion pounds in its first year, increasing to 1.9 billion pounds by 2030, according to the Office for Budget Responsibility. The move has garnered criticism from auto industry representatives who argue the tax will suppress demand and make achieving sales targets more challenging.

Part of Britain's broader strategy for net-zero greenhouse gas emissions, the tax aims to equitably distribute road maintenance costs. Yet, with demand for electric cars stalling due to high costs, the government offers discounts to encourage sales, further complicating the transition away from petrol and diesel vehicles.

(With inputs from agencies.)