Electric vehicle owners face new pay-per-mile tax – what could be the environmental costs?
- Written by Amin Al-Habaibeh, Professor of Intelligent Engineering Systems, Nottingham Trent University
Modern electric vehicles are transforming the roads with low noise, rapid acceleration and zero exhaust emissions. However, drivers of electric vehicles in the UK will now face a new 3p per mile charge and drivers of hybrid vehicles a 1.5p per mile charge.
In her speech, chancellor of the exchequer Rachel Reeves[1] said: “All cars contribute to the wear and tear on our roads, drivers will taxed on how much they drive not just on the type of car they own.”
This new EV tax[2] would add up to an extra cost of £300 annually, based on a vehicle travelling 10,000 miles per year. The government argues that this tax is needed to compensate for the reduction in fuel duty[3] from the transition to electric vehicles, and because of its budget deficit.
Given that electric vehicles are more expensive[4] than petrol or diesel vehicles and they require further investment for home EV charging stations[5], it was previously considered important to provide incentives or grants [6] to encourage the move to electric vehicles.
Rachel Reeves announced changes to EV taxes in the budget.There are three main scenarios that can show the potential effect on the environment.
Scenario 1: the environmental champions
Let’s consider a family that has an EV and likes to do things that are good for the environment. They may prefer to continue using electric vehicles to support net zero and clean air in their cities, despite the tax rise.
The chancellor’s decision would increase the cost of using their EV. But if the monthly increase of running the EV exceeds the cost of public transport, this environmentally conscious family might consider using their car less and using public transport more.
In this way the family will still contribute to the economy with the new tax, but by choosing a more sustainable transport option they will reduce their energy use, as well as the tyre and brake particle pollution their EV creates.
Scenario 2: the financially driven
In another scenario, a financially conscious couple might have bought their EV because they liked driving but wanted to avoid paying so much for petrol, tax and congestion charges.
Alongside the new pay-per-mile tax, congestion charges for EVs are rising. In London, for instance, the 100% cleaner vehicle discount for electric vehicles will be replaced the end of December[7] with a 25% discount for electric cars and 50% for vans until March 2030. This does at least offer some saving over petrol and diesel still.
The cost analysis will depend on many factors. These include purchase cost, vehicle excise duty, road tax, costs of congestion charges and low emissions zones, maintenance costs, mileage per year, style of use, business tax, fuel or electricity costs, depreciation, location of electric charging (home or public), and any other expected additional taxes or related interest rates.
According to research[8], for an average annual distance of 10,000 miles, the annual cost of running an electric vehicle is about £1,154. This is about 50% less than the estimated £2,316 equivalent cost to run a conventional petrol car for the same period. With the extra 3p per mile tax, the annual running cost would be £1,454 so the EV could still be an attractive option.
However, on average, electric vehicles in 2025 were 18% more expensive[9] up front than petrol or diesel vehicles. According to OneEv Group[10], an EV app company, the cost of buying an electric vehicle is £39,000 compared with a petrol vehicle at £33,000.
And based on fuel and electricity prices, the cost of ownership for three years is reported to be around £41,650 and £38,445, respectively. This means EV ownership over three years is already more expensive by £3,205. If the car is driven 10,000 miles per year, with the new 3p per mile tax the total difference would come to £4,105 over three years.
Based on the above, if they carry on travelling the same number of miles, but don’t change their car, there are some financial downsides but no additional environmental consequences.
Scenario 3: the late adopters
All new cars will have to be electric or hybrid from 2030. But people who are currently driving petrol or diesel cars still might not switch to electric vehicles due to the additional costs.
There are already estimates of around 440,000 fewer EV sales[11] because of the new pay-per-mile tax. In this case, the expected government shift to net zero by 2050 might have to be delayed[12]. And pollution levels would be reduced by less.
Therefore, it is with this group of people that there might be the biggest environmental consequences.
Environmental effect and car sales
How big might the effects of the new tax be in a worst-case scenario? We can work out a rough potential estimate for EV drivers switching back to internal combustion engines.
There are about 36.2 million[13] cars in the UK, of which there are 1.3 million EVs[14]. And 13.9%[15] of UK vehicles drive more than 10,000 miles, based on available data from 2021.
If a similar proportion of the 1.3 million EV drivers decided to move to internal combustion engine vehicles because they would suffer most from the new tax, this could mean 180,700 more petrol and diesel cars on the road. Assuming an equal split between petrol and diesel, this could result in over 433,680 extra tonnes of CO2 emmitted per year[16] (based on 240g of CO2 per mile).
Similarly, calculating particulate matter at 0.005g/km[17] (0.008g/mile), the extra cars would equate to around 14.45 more tonnes of particulate matter. Using the same method, the same number of cars could create 346.9 tonnes per year[18] of nitrogen oxide gases (based on 0.192g/mile). This would mean significant additional air pollution.
In addition to the possible increased air pollution, engine oil change could require on average an additional five litres per year per vehicle. This would be about 903,500 additional litres of engine oil.
Any increase in petrol or diesel use could also create an increased risk of cardiovascular and respiratory illnesses[19] related to pollution in cities.
We don’t know that this scenario will come to pass but it gives a sense of how environmental impacts can add up when many people react to different incentives. However, if the same number of people in this scenario carried on using EVs, and some drove less, then there would be no increase in air pollution levels. And potentially the particulate level could decrease because of fewer journeys.
What remains the biggest threat to the environment is if a large group of people who were thinking of buying EVs choose not to do so.
References
- ^ Rachel Reeves (www.bbc.co.uk)
- ^ EV tax (theconversation.com)
- ^ compensate for the reduction in fuel duty (evpowered.co.uk)
- ^ more expensive (www.britishgas.co.uk)
- ^ home EV charging stations (www.britishgas.co.uk)
- ^ incentives or grants (www.gov.uk)
- ^ will be replaced the end of December (tfl.gov.uk)
- ^ research (www.fleetnews.co.uk)
- ^ 18% more expensive (www.am-online.com)
- ^ OneEv Group (oneevgroup.com)
- ^ 440,000 fewer EV sales (www.bbc.co.uk)
- ^ net zero by 2050 might have to be delayed (commonslibrary.parliament.uk)
- ^ 36.2 million (www.smmt.co.uk)
- ^ EVs (www.smmt.co.uk)
- ^ 13.9% (www.field-dynamics.co.uk)
- ^ tonnes of CO2 emmitted per year (enveurope.springeropen.com)
- ^ 0.005g/km (www.theaa.com)
- ^ 346.9 tonnes per year (www.theaa.com)
- ^ cardiovascular and respiratory illnesses (www.gov.uk)
