One of the great perks of having an electric vehicle is the fact that, at the moment, there is no Vehicle Excise Duty (incorrectly called Road Tax) to pay on them. However, by the time that new petrol and diesel vehicles are no longer legally for sale in the UK, an alternative to the current tax system will need to be found. Vehicle Excise Duty contributes towards government programs, and it is a black hole that needs to be filled.
In this EV blog post we will first discuss the current situation. Then we will look at the number of alternatives proposed and whether they have a real prospect of success.
Where Are We Now With Electric Vehicle Road Tax?
For the 2024/2025 tax year there is a flat rate of £190 to pay on Vehicle Excise Duty. With 29.4 million petrol and diesel cars on the road, this amounts to £5.586 billion. This figure doesn’t even take into account the tax money earned from vans and hybrid vehicles. As you can see, there is a really big black hole in government finances that will need to be filled when petrol and diesel are made obsolete.
So, with such a large amount of money to make up, where, when and how are the next questions to ask. And believe me, these are serious questions that are being asked by people already.
Option One – Electric Vehicle Road Tax
The first option is the most obvious one. Why not just introduce Vehicle Excise Duty, or an electric vehicle road tax, to EVs. However, even before electric vehicles took off, there were murmurs around saying that this is an out of date system. It seems counterproductive to introduce the same taxation system when we are at the perfect junction to break away from it seamlessly… ish.
If this were to be the chosen method, another important question arises. When? If it is introduced too soon, there is a chance that the growth of the electric vehicle market could be stunted. Started too late and we could see a government funding crisis unfold. This is a difficult position to be in and I am glad I am not the one who would have to make the final decision on an implementation date.
Option Two – Pay-Per-Mile
The second option is one that we are hearing a lot of calls for at the time of writing this article. By charging by the mile, the idea is that the charges are spread fairly based on the amount that each driver uses the roads. However, there are more than just a few questions that arise when you look into this option more closely.
Firstly, and most importantly, how on earth are you going to measure how many miles people are doing? A possible option might be to introduce tolls on the motorways. This is something that is practised in many European countries, including France. It surely wouldn’t be workable to fit something to every single electric car already on the road.
Another point is that this would punish our white van fleets who are the backbone of British industry. They obviously cover a lot of miles week in and week out.
A Third Option – Get the Money Elsewhere
There is another option to make up the shortfall in the country’s coffers. Tax could be implemented in other areas, particularly where products, services or practices use or are based on fossil fuels.
Although this idea would help push businesses to adopt greener practices, it is certain to be a controversial way to go. Companies will feel punished by having to pay for the shortfall in funding that will be missing from car taxes. It will be felt that the £6.1 billion that is spent every year on road maintenance would be paid for by road users.
In Conclusion
No solution will appease everyone. All of the options mentioned, plus the options we have not mentioned, have their own positive and negative aspects. However, one thing is for sure, there needs to be a solution to filling the electric vehicle road tax issues which will cause a multi-billion pound gap in UK finances.
What do you think the solution to the problem is? If you have some ideas, or want to give your take on the issues raised in this blog, then let us know on our social media channels.
