As was widely forecast, the UK's Chancellor of the Exchequer, the Right Honourable Rachel Reeves, announced in the 2025 Budget that the UK will be consulting on introducing a distance-based road user charge (RUC) called, confusingly (and of course deliberately) the electric Vehicle Excise Duty (eVED).
This is distinct from Vehicle Excise Duty (VED) which is essentially equivalent to annual vehicle registration fees seen in most countries worldwide. Both electric vehicles (EVs) and plug in hybrid electric vehicles (PHEVs) have been subject to VED in the UK since April 2025 after many years of exemptions, although the rates for the initial registration of such vehicles are lower than for petrol and diesel vehicles (£10 (US$13.23) in the first year for EV/PHEVs, £110 to £5490 (US$146 - US$7262) depending on the CO2 emissions rating). In the second and subsequent years, most cars are on the same rate for VED. The concessionary rate for VED for EV/PHEVs is currently due to expire in 2030.
VED raises £8.4b (US$11.11b) per annum, and is hypothecated to the National Roads Fund, which funds National Highways - the Crown company responsible for England's strategic road network (national highways!) and also includes some funding for local roads.
However, eVED is not like the annual registration fee, in that it is not a fixed tax. The only parallel is that it will be collected at the same time as the registration fee (which is an echo of Hawaii's HiRUC programme which collects HiRUC at the same time as the annual vehicle registration).
eVED is a distance-based RUC, presumably called so because in the UK, the term RUC was used to legally describe any congestion charging type scheme.
(The one commonality around road pricing/RUC is that it appears to be absolutely impossible for many jurisdictions to use the same terminology to name the same concept)
eVED is proposed to apply from April 2028 and the consultation document on the proposal is here.
In one sense this is a huge leap forward. The UK has spent over 20 years with on and off debates about some form of national distance based road charging, and has mostly been focused on highly sophisticated distance, time and location based pricing (at once time known as TDP (time distance place) pricing). However, as much as academics, bureaucrats and technocrats have advanced how and why this should be done, they have proven completely incapable of developing a policy package and communicating such a package to the public, to make it acceptable.
eVED, by only charging EVs and PHEVs, and only being based on distance is a much simpler proposition, and might just happen.
Why?
Fuel tax revenue loss, pure and simple. Also, as EVs pay nothing to use the roads, they are likely to generate more demand for distance travelled than other vehicles, contributing more to congestion.
Fuel tax raised £24.4b (US$32.3b) per annum for the UK Treasury in 2024. Noting none of it is hypothecated, unlike in the US. The average petrol or diesel car owner pays around £0.06 per mile (US$0.079 per mile or US$0.127 per km) per vehicle. This equals about £480 (US$635) per year to use the roads in the UK. Of course this is just an average, but is an indication of a point to compare to EVs and PHEVs.
Fuel duty revenue is forecast to halve by the mid 2030s. Curiously the discussion paper depicts this as a loss of funding for 265 million General Practice doctor appointments (as the UK charges nothing for such appointments, for all residents, regardless of income, under its National Health Service), because fuel duty is not linked to any spending. This is seen as perhaps more politically significant than funding for road maintenance (which is far exceeded by the income from fuel duty).
In short, eVED is to try to make up for this revenue loss for cars.
EV vehicle sales
Treasury reports that around a quarter of new car sales in October 2024 were EVs. The UK Government's policy is to ban sales of conventional ICE cars in 2030 with a further ban on sales of hybrid and PHEVs by 2035 for light vehicles altogether.
How much will it be?
For pure EVs, £0.03 per mile (US$0.04 per mile or US$0.064 per km). Around half the average paid in fuel duty by petrol or diesel cars. Of course at that rate it only recovers half of what fuel duty currently does, which is in part a way to continue encouraging use of EVs relative to petrol and diesel cars. It will be increased according to inflation annually.
PHEVs will be charged at half that rate, at £0.015 per mile (US$0.02 per mile or US$0.032 per km). This is based on nothing more than a political call on what the rate should be, not any reflection of relative payment of fuel duty compared to pure electric use.
How will it work?
eVED will be an addition to VED, and be paid annually. Vehicle owners will be asked to estimate their annual mileage and pay either that whole amount upfront or in instalments throughout the year. The actual mileage will be checked with the annual safety inspection (which only occurs when a car becomes three years old). For the first two years of a car's life, the odometer will apparently need to be checked for the annual registration. This will be another inspection, which it is hoped can simply be combined with vehicle annual servicing (which most owners of new vehicles undertake regardless).
Systems will need to be put in place so authorised MOT (safety inspection) garages can collect and pass on mileage data to the Driver and Vehicles Licensing Authority (DVLA).
At the mileage inspection, if the estimate of the year's mileage is too high, then there will be a credit for the mileage for the following year. If it was too low, then there will be more to pay either in a lump sum or in higher instalments for the year ahead.
When sold, any prepaid mileage will stay with the vehicle, and be visible to any new owners (so it can be factored into the price).
What about foreign vehicles in the UK?
They won't be subject to eVED, until they become subject to VED (which is when they remain in the UK for at least six months). This will be quite an issue in Northern Ireland with its open border to the Irish Republic.
What about mileage driven outside the UK?
Tough. All mileage counts. The view is that there is no refund for fuel duty used in vehicles driven overseas, so the same applies here. Of course nobody pays fuel duty for an entire year, and few even pay as infrequently as monthly, so it isn't quite the same.
Is it just about odometers?
Yes, for now, but the consultation seeks advice on how OEM (Original Equipment Manufacturer) telematics might be used voluntarily to automatically report mileage. The consultation is silent on whether it might be used to exempt mileage driven overseas.
The consultation notes that 2.3% of vehicles have had their odometers tampered with to lower their readings. It is unclear whether this figure is applicable to EVs and PHEVs as much as other vehicles.
What's the money to be used for?
The consultation doesn't say, although there are references to contributing towards the "wear and tear on the roads" caused by cars (which is negligible). It seems likely to be treated as general Crown revenue, and not be hypothecated. This won't help public acceptability or indicate any actual link to what vehicles should pay based on a fair allocation of infrastructure costs to those vehicles (but that has never been the case for fuel duty either).
What's next?
The scheme is not meant to start until April 2028, so the consultation responses will be the first check on the public mood for the proposal. There has already been some backlash, but that may be as much about the unpopularity of some general Budget measures around income tax as this measure.
There are plenty of questions beyond those in the consultation document. The scalability of this proposal beyond EVs and PHEVs being one of them, especially to heavy vehicles. I'll have to more to write about it in due course.
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