The UK Government’s plan to introduce mileage-based Vehicle Excise Duty for EVs (eVED) in 2028 could cost the UK economy up to £4.8 billion in a worst-case scenario, a trade association has claimed.
BEAMA, which represents manufacturers and providers of energy infrastructure, said the forecast was based on what would happen if UK EV sales fell at the same rate to what happened in New Zealand when that country introduced an EV mileage tax, and if these sales were not replaced by petrol or diesel cars.
It said this scenario could cost £4.8 billion in revenue in 2028, and potentially more in 2029, between a loss in VAT revenue to HM Treasury and compliance costs incurred by leasing companies.
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BEAMA added that even if EV sales were replaced with petrol and diesel car sales in 2028, there would still be an £890 million cost in lost tax receipts and compliance costs.
Together with EVA England, ChargeUK and REA, BEAMA said it was therefore calling for the policy to be delayed until 2030, with the partners having written to Daniel Tomlinson MP, exchequer secretary to the Treasury, to argue this point.
eVED ‘fiscal own goal’
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, CEO at 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 at 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 at 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.”
Motoring taxation reform ‘overdue’
The Government launched a consultation on its eVED policy in March this year. In a ministerial foreword, Tomlinson called motoring taxation “one of the clearest examples of overdue reform”.
He wrote: “Today, drivers of petrol and diesel vehicles pay tax on how much they drive through fuel duty at the pump, while drivers of electric vehicles currently make no equivalent contribution.
“If we do nothing, then by 2030 around one in five car drivers are expected to pay no fuel duty at all, while other motorists will continue to contribute an average of £480 a year. Given all cars cause congestion and wear and tear on the roads, this is not a fair outcome.
“That’s why the government will introduce electric Vehicle Excise Duty (eVED) from April 2028. It will be set at half of the equivalent rate of fuel duty for electric cars, and half again for plug-in hybrid cars. eVED will ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle.”