The Autumn Budget could include a new pay-per-mile tax on EVs to fill the impending black hole in revenues from fuel duty, reports suggest.

The new tax, first disclosed in a report in the Daily Telegraph, would see EV drivers charged 3p per mile on top of other road taxes if it goes ahead. Hybrid vehicles would also be charged but at a lower rate.

The BBC said there are “conversations” within government about the possibility of the new levy on EVs.

A government spokesperson told the BBC: “Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers.”

According to the Daily Telegraph, the scheme could kick in from 2028, by which point millions of people will be driving EVs and be subject to the new tax.

The 3p charge would equate to around £12 for a journey from London to Edinburgh, according to the newspaper, which also said that drivers would have to estimate their own mileages and pay the tax upfront. Drivers would then receive credit if mileage was under the estimate or would pay a ‘top-up’ charge if they exceeded the predicted usage.

Fuel duties represent a major source of revenue for government and have historically provided a significant proportion of the UK’s tax-take, making up almost 7% in 2019/20. In contrast, the Office for Budget Responsibility (OBR) forecasts that fuel duty revenues will raise just £24.4bn across the current 2025/26 financial year, representing 2.0% of all receipts, as the current fuel duty freeze and the switch to EVs leaves a big hole in government finances.

This April saw the introduction of Vehicle Excise Duty (VED) for EVs, as announced in the 2022 Budget, but the emerging ‘tax gap’ from the switch to EVs requires further action.

A pay-per-mile tax for EVs has long been advocated by campaign groups, think-tanks and even PwC and the Transport Committee. Such a move was rumoured last year but the reports were dismissed in the run-up to the Budget.

Any change would represent a significant policy shift from the Government’s previous stance.

“We want a fairer system for all drivers whilst backing the transition to electric vehicles,” a government spokesperson told the BBC.

“It is right to seek a tax system that fairly funds roads, infrastructure and public services,” they added.

But many in the automotive and EV sectors have slammed such a move, amid continued aversions among some drivers, particularly private motorists, to switch to EVs.

The Society of Motor Manufacturers and Traders (SMMT) said: “We recognise the need for a new approach to motoring taxes but at such a pivotal moment in the UK’s EV transition, this would be entirely the wrong measure at the wrong time.

“Introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake – deterring consumers and further undermining industry’s ability to meet ZEV mandate targets, with significant ramifications for perceptions of the UK as a place to invest.

“A smarter, fair and future-ready taxation system requires a fundamental rethink – one that must be done in full partnership with the industry and other stakeholders.”

And Octopus Electric Vehicles lambasted the potential plans.

James Court, head of policy at the electric car leasing firm, said: “EV drivers should pay – but it should come at the right level and the right time. Now would be far too soon – EVs represent only 4% of cars on our roads and a tax would raise a minimal amount until this number is bigger. As we’ve seen in other countries, introducing a charge now would stifle the growth we’ve seen over the past years, and be self-defeating.

“What is needed is a considered plan for the best and fairest way for all road users to handle the change in vehicle mix over time.”

Melanie Lane, chief executive at Pod – one of the UK’s largest EV charging providers – also said a pay-per-mile tax could derail the electric car transition.

“Yesterday’s EV registration figures showed positive momentum and a clear signal that investment and incentives are working. We urged government to reward, not punish, those making the switch – yet today’s pay-per-mile EV tax proposals risk doing exactly that.

“It’s another example of policy that isn’t joined up: feeding with one hand while taking away with the other. This move undermines both the Government’s own EV transition goals and driver confidence, just as adoption is accelerating.

“A government spokesperson has suggested this will create a fairer system for all drivers – so we also expect to finally see the end of the fuel duty freeze, with no further extensions announced in the upcoming Budget.”

EVA England, which supports existing and prospective EV drivers, also said it was the wrong time to bring in further costs for EV drivers.

Vicky Edmonds, chief executive, commented: “Our survey data shows that at least half of drivers are still finding the upfront purchase costs of these vehicles to be too high, and that half of EV drivers without driveways are finding their vehicles more expensive to run than their former petrol and diesel cars.

“These challenges to switching to electric must be addressed urgently, and before any scheme that suggests additional costs is considered.”

The Energy and Climate Intelligence Unit (ECIU) said that even with a 3p per mile tax, EVs would still be £1,000 cheaper to run per year than petrol cars but also warned of ‘mixed messaging’.

Colin Walker, head of transport at the research and analysis organisation, elaborated: “Many experts are understandably concerned that this could send the wrong signal to drivers thinking of making the switch to EVs, with the Government repeating the chopping and changing of EV policies that we saw under the previous administration.”

He added: “This announcement comes shortly after the Government gave in to industry lobbying by weakening its EV sales targets. This could enable industry to push more hybrids on drivers that burn five times more fuel than their manufacturers claim, and cost hundreds of pounds more a year to run than EVs.

“Longer-term, it would be expected that all road users make a contribution, but Government risks sending mixed signals and undermining consumer confidence by trying to encourage drivers into EVs with one policy, and possibly putting them off with another. The net result could be to keep people stuck in dirtier and more expensive petrol cars for longer.”