Government plans for a new EV pay-per-mile tax risk could create “unnecessary administrative complexity” unless the scheme is carefully designed around automation and simplicity from the outset, the Institute of Chartered Accountants in England and Wales (ICAEW) has warned.

A government consultation on the introduction of Electric Vehicle Excise Duty (eVED) – a new mileage-based tax for electric and plug-in hybrid cars starting in April 2028 – closed on 18 March 2026.

The proposed rates aim to replace falling fuel duty revenues while remaining lower than the equivalent cost for petrol and diesel drivers.

However, ICAEW said in its response to the HM Treasury consultation that the success of eVED will depend on how easy it is for motorists and businesses to comply.

While the institute said it recognises the need to replace declining fuel duty revenues as the UK transitions to EVs, it warned that if the new system is not carefully designed around automation and frictionless reporting, it could undermine the Government’s objective of encouraging the uptake of electric vehicles.

eVED rates will be set at 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrid cars. Vans, HGVs and motorcycles will initially be exempt from eVED at its 2028 introduction. The tax will be administered by the DVLA and integrated into the existing road tax (VED) system.

eVED will introduce an administrative burden on EV drivers, who will be required to estimate their annual mileage upfront to calculate monthly payments, with a reconciliation process required at the end of the year to settle under or overpayments.

The ICAEW suggested the new system should operate on an automated ‘set and forget’ basis to minimise user error and administrative friction. This should feature auto-populated mileage estimates based on historical MOT data, and safeguards to prevent motorists from intentionally suppressing their mileage estimates year-on-year.

The chartered accountancy body also said that the relationship between eVED and fuel duty must be monitored to ensure the tax differential remains between EVs and cars with internal combustion engines, said ICAEW. Fuel duty has been frozen for long periods in recent years and if that pattern re-emerges, while eVED increases with inflation, the fiscal incentive to transition to an EV could be rapidly eroded.

As far as the sale of used EVs is concerned, ICAEW warned that transferring an eVED tax liability on resale risked unfairness and market distortion if buyers unknowingly inherited a tax position based on the previous owner’s driving behaviour or mileage estimates. This would create uncertainty at the point of sale and undermine the confidence in the second-hand EV market.

Finally, the institute suggested the implementation of a penalty-free period of at least 12 months after eVED is introduced, with a proportionate penalty regime that clearly distinguishes between genuine human error and deliberate non-compliance, supported by a clear statutory ‘reasonable excuse’ framework.