The introduction of electric vehicle excise duty (eVED) in 2028 could create unnecessary complexity and risk undermining electric vehicle (EV) uptake, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
In its response to HM Treasury’s consultation, the Institute said the success of the new tax will depend on how easy it is for motorists and businesses to comply.
Under current proposals, EV drivers would need to estimate annual mileage in advance to calculate monthly payments, followed by a reconciliation process at the end of the year to settle any differences.
ICAEW warned that this approach could introduce administrative burdens for drivers and fleets, particularly as many have not previously had to engage with vehicle taxation in this way.
It said the system should be designed around automation, with a “set and forget” model using historical MOT data to generate mileage estimates and reduce the risk of errors.
Financial to switch to EVs could be weakened
The Institute also highlighted the need to maintain a clear tax differential between EVs and internal combustion engine (ICE) vehicles.
It warned that if fuel duty remains frozen while eVED rises with inflation, the financial incentive to switch to electric could be weakened.
Concerns were also raised about the impact on the used EV market, with ICAEW warning that transferring eVED liabilities between owners could create uncertainty at the point of sale.
This could lead to buyers inheriting tax positions linked to a previous owner’s mileage estimates, potentially distorting the market and affecting consumer confidence.
The Institute also called for a penalty-free period of at least 12 months following introduction, alongside a proportionate enforcement framework that distinguishes between genuine errors and deliberate non-compliance.
Ed Saltmarsh, technical manager for VAT and customs at ICAEW, said: “We understand the need to replace fuel duty revenues as the vehicle fleet changes, but if eVED is not designed with simplicity and automation at its core, complexity risks undermining a transition the government is otherwise trying to support.
“Feedback from our members indicates concern about what the proposed system will mean in practice.
“The proposal introduces estimation, reconciliation and self-reporting for millions of drivers who have never had to interact with vehicle tax in this way before. Getting the design right from the outset will be crucial.”