A new tax for electric and hybrid vehicles has been confirmed in a leaked report outlining the UK’s economic and fiscal outlook ahead of the Budget.
The Office for Budget Responsibility (OBR) document said the charge would mean electric car drivers would pay a road charge of 3p per mile, while plug-in hybrid drivers would pay 1.5p per mile from April 2028, with rates rising each year in line with inflation.
The government said the new tax is “about half the fuel duty rate paid by drivers of petrol cars”, the report said.
In a statement, the OBR apologized for the leak and said it was investigating the error.
Under the measures, an electric car driver who drives 8,500 miles in the 2028-29 financial year is expected to pay around £255 – about half the cost per mile that petrol and diesel drivers pay in fuel tax.
According to the OBR, the new per-mile charge is expected to bring in £1.1 billion in the financial year 2028-29, rising to £1.9 billion by 2030-31.
However, how much money it actually raises will depend on how many people buy electric cars over the next five years, with the report saying the yield is “uncertain”.
All new cars will have to be electric or hybrid from 2030, when a ban on the sale of new petrol and diesel cars comes into effect. But this new tax may make electric cars less attractive.
“This new charge is likely to reduce demand for electric cars as it increases their lifetime costs,” the report said.
“To meet the mandate, manufacturers will need to respond by lowering prices or reducing sales of non-EV vehicles.”
Overall, the fee is expected to result in reduced sales of about 440,000 electric cars, although other government policies could help offset about 130,000 of them.
Due to this decline in sales and slightly shorter driving distances, the total amount of money raised by the charge could be £200m less by 2030–31.
Delvin Lane, chief executive of Instavolt, which develops and installs chargers, said the tax could discourage people from switching to electric cars.
He said drivers without home chargers are already paying higher taxes for public charging, and rural and low-income drivers would be disproportionately affected.
“We urge the government to work closely with the charging and automotive sectors to co-design a fair, future-proof system that maintains incentives to switch to zero-emission vehicles while ensuring sustainable road taxation.”
Edmund King, chairman of the AA, said: “The Budget has hit drivers hard and the Chancellor has announced major tax proposals for EV owners.
“Drivers fully understand that the government needs to strike the right balance between raising cash to invest in roads, while also ensuring it does not slow down the transition to electric cars while meeting environmental targets.”
<a href