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Treasury Studies Motoring Tax Overhaul as Think Tank Pushes Pay‑Per‑Mile

Falling fuel duty from rising EV use drives a search for replacement revenue before the 26 November Budget.

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Drivers could see charging costs significantly reduced (Photo by Ina FASSBENDER / AFP)
The Chancellor is said to be examining ways to ensure 'all drivers pay their fair share' as EV uptake increases across the UK (Photo: Ben Birchall/PA)
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Overview

  • Reports say options under active consideration include weight‑based levies and a road‑pricing model to recoup declining fuel duty receipts.
  • To avoid deterring EV uptake, officials are weighing bigger upfront purchase grants, cutting or equalising VAT on public charging, altering business rates for charge points, and pressing Ofgem to reduce standing and capacity charges.
  • The Resolution Foundation proposed a mileage‑based system scaled by vehicle weight that could total about £630 a year for an average driver, while the Treasury said it has no plans to introduce road pricing.
  • Around 1.3 million people own an electric car and the plug‑in grant currently offers up to £3,750 on selected models, with EVs now paying the minimum £195 Vehicle Excise Duty and company car tax for EVs scheduled to rise to 5% by 2027–28.
  • Treasury insiders and OBR forecasts point to a multi‑billion long‑term shortfall from fuel duties, with formal tax decisions expected at the 26 November fiscal event and officials declining to comment on detailed speculation.