The UK’s shift toward electric vehicles (EVs) has hit a potential roadblock. One that could potentially cost the economy billions before the decade is out. New research from trade association BEAMA warns that introducing a “pay-per-mile” Electric Vehicle Excise Duty (eVED) in 2028 could result in a fiscal “own goal.” Specifically, it could drain up to£4.8 billion from the UK economy.
This figure represents a worst-case scenario where the new tax triggers a collapse in consumer demand. In fact, it would be comparable to the 50% decline seen in New Zealand following a similar policy rollout.
A Fiscal Contradiction?
The core of the issue lies in the timing. So, a coalition of industry heavyweights, including BEAMA, EVA England, ChargeUK, and REA, has written to the Treasury to highlight a glaring contradiction. Notably, the projected £4.8 billion loss in 2028 would actually exceed the total revenue the tax is expected to raise by 2031 (roughly £4.3 billion).
Even a more moderate scenario could have an impact. For instance, drivers switch back to petrol or diesel instead of delaying purchases entirely. However, the economy could still face a £890 million hit in the first year alone due to lost VAT receipts and heavy compliance costs for leasing firms.
Why the 2028 Date is Dangerous
- Market Instability: Introducing the tax in 2028 hits the market just as it reaches a critical mass. Thus, potentially scaring off middle-income households.
- Infrastructure Impact: The uncertainty is already threatening to delay planned investments in the UK’s charging network.
- Compliance Chaos: Industry experts warn the proposed three-pence-per-mile mechanism is “not fit for purpose.” What’s more, it could open the door to fraud and unfairness.
The Call to #DontTaxTheTransition
The coalition is urging the Government to delay the eVED rollout until 2030. Because, then the ban on new petrol and diesel car sales will be in effect. Therefore, the Government would provide the stability needed for manufacturers to continue investing in local communities and the wider supply chain.
“The current proposals risk leaving EV owners out of pocket and eroding confidence amongst those thinking about making the switch,” says Vicky Edmonds, CEO of EVA England. “eVED must be delayed until the Government can prove the proposals work for drivers.”
Matt Adams, Head of Electrical Transport Systems at BEAMA adds: “Introducing the pay-per-mile policy early is 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.”
For fleet operators and leasing companies already grappling with the transition, the 2028 deadline represents an “unworkable” condition that could stall the momentum of the UK’s green goals.
