The Chancellor is set to hit electric vehicle (EV) drivers with a new road charging tax in the Budget later this month.
Rachel Reeves is expected to announce that EV owners will be charged 3p per mile on top of other road taxes, as Treasury sources disclosed to the Mail yesterday.
This will mean that the average driver will pay an extra £250 per year by 2028.
Meanwhile, hybrid cars will also face a new, but lower, charge.
The Treasury will reportedly make the case that the new tax is needed to cover falling fuel duty revenue as more and more vehicle owners go green, with up to six million extra EVs expected to be on the roads by the time the scheme is introduced.
Reeves will also argue the move will be fairer as petrol drivers already pay £600 a year on average in fuel duty.
It will also help the Treasury raise an estimated £1.8billion by 2031 and help plug a fiscal hole caused by the green transition due to the loss of revenue from petrol cars.
A pay-per-mile road taxation system has been discussed by governments and industry experts for years but has often been seen as hard to implement.
Chancellor of the Exchequer Rachel Reeves is expected to announce a new road charging tax for electric vehicles in the budget later this month
The Daily Telegraph reported that the scheme would be aligned to the annual payment of vehicle excise duty (VED), which affects all UK motorists and EV drivers have had to pay the charge since April.
The new element is being described as ‘VED+’ and being framed as a way to get drivers of green cars to pay more each year.
EV drivers will have to estimate the number of miles they will drive in the year ahead and pay a fee.
Motorists need not worry if they fail to reach that amount, the money can be carried over into the next year.
If they drive more miles than estimated, they would top up their payment.
Repeated polls have shown that road-pricing is very unpopular among drivers and has been branded a ‘poll tax on wheels’ which amounts to an extra ‘stealth road tax’.
But critics warned any hikes on drivers would be ‘disastrous’ amid a cost-of-living squeeze and because it would threaten to stoke inflation.
Rachel Reeves is expected to announce that EV’s will be charged 3p per mile on top of other road taxes. Meanwhile, hybrid cars will also face a new, but lower, charge
Sir Mel Stride, the Conservative shadow chancellor said: ‘It would be wrong for Rachel Reeves to target commuters and car owners in this way’
Edmund King, AA president, said: ‘Drivers are worried that they will be a prime target for increased motoring taxation as the Chancellor seeks to increase her income.
‘Hiking UK fuel duty, with global turmoil threatening oil prices at every turn, could be disastrous for the UK economy and drivers dependent on road travel.
‘The danger of ramping up motoring costs further is that it hammers working people, adds costs to deliveries and businesses — and ultimately fuels inflation.
‘The Budget should not be an excuse for rampant cash-guzzling from motorists.
‘The private motorist is not a bottomless pit from which the authorities can help themselves to cash whenever they want to – whether that is tax, parking charges, congestion charges and fines.’
The RAC’s fuel guru, Simon Williams, said: ‘Our latest research shows the cost of simply keeping vehicles on the road has become the most significant financial challenge facing drivers.
‘Driving is a must for so many people, yet the costs are running ever higher. We urge the Government not to hit drivers in the pocket at the Budget.’
Concerns have also been raised that the tax could be extended to all cars.
On top of this, Reeves is also considering scrapping the 5p a litre Fuel Duty relief in her Budget this month, in what would be a £2billion to £3billion raid on hard-pressed drivers.
Sir Mel Stride, the Conservative shadow chancellor, told the Daily Telegraph: ‘If you own it, Labour will tax it. It would be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill a black hole she has created in the public finances.
‘With Labour’s cost of living crisis, now is not the time to hit hard-working families and businesses with another tax raid.’
