Neil Turner

In last week’s budget, a new electric vehicle mileage tax was announced. This will apply to all electric and plug-in hybrid vehicles from 2028, and will mean electric vehicle owners will initially pay 3p per mile, and plug-in hybrid owners will pay 1.5p per mile.

According to the BBC’s reporting, the mileage will be checked when the car has its annual MOT once it is three years old, or at other annual checks at the end of years one and two. The charge should then be combined with the annual Vehicle Excise Duty payments, which electric vehicle owners now have to pay as well as of the 1st April this year.

This method probably makes the most sense, but when the tax was first mooted earlier in the year, there were various theories about how it could be collected. I’m going to go through some methods, including the most likely one, to compare their feasibility.

Recording mileage at the MOT

All cars registered in the UK, once they are three years old (four years in Northern Ireland), have an annual MOT test (MOT just standard for Ministry of Transport) to ensure that they’re roadworthy, safe, and meet exhaust emissions requirements. The car’s mileage is also recorded at this point, and so it makes sense that this is used as the basis for calculating the mileage tax as it builds on something that already takes place. There presumably would need to be some backend IT changes at the DVLA to arrange for the tax to be charged to the vehicle’s registered keeper, but this method seems to make the most sense.

Where there is an issue, is that, as mentioned, cars don’t need to appear for the MOT until they’re three or four years old. I seem to remember that, historically, cars needed an annual MOT after one year, but I couldn’t find anything to back this up so it may be me mis-remembering. If I did remember correctly, then a re-introduction of an annual MOT would resolve this. However, very few cars need major repairs after a year of use, and there would likely need to be an expansion of garages offering MOT tests to cope with an increase in demand.

What seems to be proposed instead, is a simpler test to record the mileage. I guess there would need to be new legislation in place to make this mandatory, in the same way that it’s illegal to have a car on a public road without a valid MOT (unless you’re driving straight to a garage to a pre-booked MOT appointment). However, if it’s a simple case of reading the odometer, these could potentially be done at home and wouldn’t require a garage trip.

There may also need to be better enforcement of dodgy garages which alter odometers or pass vehicles which would otherwise fail an MOT.

Include the tax when charging

At the moment, owners of cars with internal combustion engines (ICE) pay fuel duty when they buy petrol or diesel from a petrol station. So you could argue that electric car drivers should pay the text when they recharge at a public charge point, as that’s the equivalent. Right?

As I write this, I haven’t used a public car charger in four months – the last time was on the way back from Little Moreton Hall in August. All my charging has been at home (or my parents home – thanks for the free electricity, Dad). So including it in the fees paid at public chargers wouldn’t work – especially as being able to charge at home is much cheaper and one of the major benefits of having an electric car.

Indeed, home charging provides something of a conundrum here – how do you work out what electricity is being used for charging a car, and then convert the kWh used to miles? Whilst we have a dedicated electric car charger, it’s just connected to our fuse box like any other high load device. From the perspective of our energy supplier, it would be hard to tell when we’re charging the car or using our electric shower, for example. We’re not on an EV tariff (because our smart meter still isn’t working) and, in any case, our charger isn’t one that’s directly supported on intelligent EV tariffs.

Even if our charger was modified to report its usage to the DVLA, if we wanted to we could just use a slower ‘granny charger’ to get around this.

The conversion from kWh to mileage will vary for different cars. For ours, 1 kWh of power is about enough for 4 miles, but we have a relatively small Nissan Leaf. Many EVs are bigger and heavier to increase their range, and so may need more power to move.

Modifying cars to send mileage data to the DVLA

Most electric cars have internet-connected systems probably that could be configured to send mileage data to the DVLA on a regular basis, via a software update. For those that can’t, there would need to be a hardware modification, which could be enforced at the car’s next MOT. However, I could see this being unpopular from a privacy perspective, and the car manufacturers may need an incentive to spend time and money on developing this.

The advantage would be that the data could be collected in real time, rather than annually.

Include it in self-assessment tax returns

Every year, around 4000 people file their self-assessment tax returns on Christmas Day, ahead of the deadline on the 31st January. I’ve never needed to do a self-assessment tax return, as my employer handles it through Pay-As-You-Earn.

As this is a tax, I suppose it could be added to the income tax system, but then that would make (potentially) millions more people like me have to do an additional tax return that we don’t have to do presently. This may also have to rely on self-reporting of car odometers and so would be open to abuse. Let’s not go there.

How much will the mileage tax affect me?

Right now, as we’re not on a dedicated EV charging tariff, we pay 23p per kWh to charge. That also assumes that we’re charging when it’s dark (no energy from our solar panels) and our home battery is empty; it can be much less than that on a really sunny summer’s day. As mentioned, each kWh gets us about 4 miles; with the new tax, we’ll additionally pay 12p to cover those 3 miles. That’s about a 50% increase. I reckon, based on an annual mileage of around 6000 miles, we’ll pay an additional £180 each year. The Treasury are keen to stress that this is half of what we would typically pay in fuel duty, however.

Whether this will be a lump sum, or payable monthly by direct debit, remains to be seen – I assume we would pay the previous year’s accumulated mileage tax in arrears the following year. There would also need to be some mechanism for ensuing a part year of mileage tax is settled when the car is sold to a new owner.

I agree for the need for EV owners to pay for upkeep of the roads. Maintaining roads costs money, and if the money to pay for this comes from fuel duty, then there needs to be a new income stream as more people switch to electric vehicles. After all, it won’t be possible to sell new ICE cars from 2030 – that’s only four years away now. And, as electric cars tend to be heavier than an equivalent ICE model, I also agree that EV owners should cover the increased damage to road surfaces that this will cause. Basing it on mileage makes sense, as those that drive the most pay the most. Perhaps I would have liked to see a variable tax, with smaller and lighter vehicles paying a lower rate, but I don’t know how feasible this would be.