The Government’s proposed pay-per-mile electric vehicle duty could cost the UK fleet sector £260 million a year by 2028, according to the British Vehicle Rental and Leasing Association (BVRLA), highlighting potential downstream impacts for dealers.
The eVED policy, announced in the Autumn Budget, would introduce a per-mile charge of 3p for fully electric vehicles and 1.5p for plug-in hybrids.
While aimed at replacing declining fuel duty revenues, the BVRLA warns it could materially affect fleet operations, which in turn shape used vehicle supply and pricing in the retail market.
Fleets have been a more stable source of volume for EVs, as companies have powered the majority of demand, while retail demand has taken more effort to get moving in the UK.
Based on BVRLA member data, the estimated £260m annual cost includes £75m in direct administration and £185m in lost productivity from vehicles taken off the road for mileage checks.
This equates to around 10% of total revenues expected to be raised by the scheme, although some members estimate the true cost could reach 40 to 45 pence for every £1 collected.
The figures exclude one-off implementation costs, the cost of mileage readings at approved centres, and the tax itself.
What is the impact for dealers?
For dealers, any impact on fleet replacement cycles, total cost of ownership calculations and EV adoption rates is likely to influence future used EV volumes and pricing, as well as broader retail demand.
There will also be considerations for dealer groups with fleet businesses, leasing divisions and sales in the SME segment.
Giving evidence to the Transport Committee’s EV transition inquiry, BVRLA chief executive Toby Poston said the scheme as currently designed is “extremely fleet hostile” and is being introduced “in the wrong way at the wrong time”.
He highlighted the operational complexity of accurately capturing mileage across large fleets, with processes required to estimate, report, verify and reconcile data, alongside the downtime associated with annual checks.
Poston said: “Based on current fleet data, eVED would have cost rental, leasing and fleet operators around £185 million in 2025 through a combination of administration and vehicle downtime. That rises to roughly a quarter of a billion pounds by 2028 as fleets grow.
“In return, the Treasury is expected to collect around £595 million in eVED from the sector.
“This is not a marginal cost. It is a significant operational burden that ultimately feeds through to businesses and consumers who rely on these vehicles every day.
“It is an inefficient policy that adds unnecessary friction into a sector that is already investing heavily in decarbonisation.”
EV tax adds complexity and cost just as demand is picking up
Fiona Howarth, founder and director of Octopus Electric Vehicles, added: “By 2028, this is set to cost fleet operators around £250 million a year, money that ultimately comes from drivers, businesses, and households who rely on these vehicles every day.
“With huge uncertainty over oil prices and supply, we should be accelerating the transition to electric. A pay per mile approach risks doing the opposite. It adds complexity and cost just as drivers are starting to see EVs as the simpler, better option.
“This is increasingly looking like the wrong tax at the wrong time.”
The BVRLA added that the eVED policy in its current form risks becoming an “administrative headache”, adding friction and cost to the businesses delivering the UK’s EV transition.