The Government has been urged to delay the rollout of the new Electric Vehicle Excise Duty (eVED) as new research shows the fiscal impact.

Research by UK trade association BEAMA has found that implementing the eVED in 2028, as per current government plans, could cost the UK economy up to £4.8bn under worst-case scenarios.

This cost would exceed the total £4.3bn revenue that the new tax policy is forecast to raise by 2031.

The forecast is based on research from BEAMA – the UK manufacturing trade association for the electrotechnical sector – which shows that if EV sales collapse at a similar rate to when New Zealand introduced a pay-per-kilometre tax (>50% decline), and sales aren’t replaced by petrol or diesel cars, the Treasury could lose £4.8bn in 2028 and potentially more in 2029.

BEAMA quantified this by saying that a loss of £4.8bn represents a worst-case scenario, whereby the eVED forces people and companies to delay EV purchases without buying a petrol or diesel alternative. If, however, the eVED prompts all potential EV purchases to be replaced with petrol- and diesel-powered car purchases, the result would still cost the UK economy £890m in lost tax receipts and compliance costs, in the first year alone: £630m in lost VAT receipts and £260m in compliance for car leasing companies; as calculated by the British Vehicle Rental and Leasing Association (BVRLA).

BEAMA, along with EVA England, ChargeUK and REA, has called on the Government to delay eVED until 2030 to protect EV sales, as no new pure petrol or diesel vehicles would be on sale by this point.

The coalition – representing EV charging providers, manufacturers, leasing firms, driver groups, investors and insurers – argues that introducing the tax in 2028 will damage consumer confidence, suppress demand and create unworkable conditions for leasing companies and fleet operators.

The group has written to Daniel Tomlinson MP, Exchequer Secretary to the Treasury, to highlight how the introduction of this tax in 2028 will also delay planned investments in the charging sector. It is calling on the Government to #Don’tTaxTheTransition.

Matt Adams, head of electrical transport systems at BEAMA, said introducing the pay-per-mile policy early was a “fiscal own goal”.

“It will slow EV uptake, reduce EV charging investments, and cost the UK economy more than the treasury stands to raise with the taxation. A delay to 2030 would provide essential stability at a critical point in the EV transition. Manufacturers in the EV supply chain need a clear message from government to continue investment into local communities and the wider UK economy.”

Vicky Edmonds, CEO of EVA England, said eVED must be delayed until the Government can prove the proposals work for drivers.

“The current proposals risk leaving EV owners out of pocket and eroding confidence amongst those thinking about making the switch to electric, particularly lower and middle-income households and those without access to private charging.”

Mark Constable, head of transport policy at the Association for Renewable Energy and Clean Technology (REA), said: “The three pence per mile taxation mechanism will create significant aggravation for drivers. The process is simply not fit for purpose, is certainly not scalable, and also opens the system to fraud and unfairness. Consumers shouldn’t tolerate this form of taxation.”

Lastly, Jarrod Birch, head of policy and public affairs at trade association ChargeUK, said:  “The three pence per mile tax is another contradiction at the heart of government’s EV policy which will impact those who cannot charge at home the hardest. EVs are experiencing a surge of interest as an alternative to rollercoaster petrol prices. Government should be doubling down on the transition by making buying and charging an EV affordable for all.”

Other organisations have also criticised the Government’s eVED plans. After warning that the tax could saddle the fleet sector with £260m in annual costs in 2028, the BVRLA has urged the Government to scrap the current design in favour of a technology-led, simplified system that aligns with how modern fleets actually operate, rather than penalising early adopters with an “administrative headache”.

And the Association of Fleet Professionals (AFP) has said that the tax should be pushed back to 2030 to avoid major challenges for the fleet sector and the EV transition at large.

In its response to the recent government consultation on eVED, the industry body said the planned 2028 introduction would impact heavily on adoption of electric cars and, in its current form, create a wide range of difficulties for fleet managers.