Introducing a new road tax on electric vehicles in 2028 could cost the UK economy nearly £5 billion – more than the policy is expected to raise in its first three years – according to research by trade association BEAMA.
The warning centres on the planned Electric Vehicle Excise Duty (eVED), a pay-per-mile charge that the government intends to bring in for EV drivers.
In April 2024, a similar policy was introduced in New Zealand, following which EV sales dropped by more than half, with those lost sales not being replaced by petrol or diesel purchases
If this response is repeated in the UK, BEAMA’s analysis suggests that the Treasury could face a £4.8 billion shortfall in 2028 alone. That would comfortably exceed the roughly £4.3 billion the tax is projected to generate by 2031.
Even in a more optimistic scenario, where drivers who shelve their EV plans instead buy petrol or diesel cars, the economy would still take a hit. Lost VAT receipts and administrative costs for leasing companies could amount to around £890 million in the first year.
BEAMA is not alone in raising the alarm. A coalition including EVA England, ChargeUK and the REA (representing charging providers, manufacturers, leasing firms, driver groups and investors) has written to Exchequer Secretary Daniel Tomlinson MP, arguing that a 2028 launch would undermine consumer confidence, suppress demand and create serious difficulties for fleet operators and leasing businesses. The groups warn it would also put planned investment in charging infrastructure at risk.
Their proposed solution is to delay the tax until 2030, by which point the sale of new petrol and diesel cars will have been phased out. At that stage, they argue, applying road tax to electric vehicles would be a natural step rather than a potential brake on the transition.
The coalition has framed its campaign around the slogan ‘Don’t Tax the Transition,’ arguing that penalising EV buyers now – at a moment when the market still needs support to grow – is fiscally and strategically counterproductive.
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.’
Jarrod Birch, Head of Policy and Public Affairs, ChargeUK added: ‘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.’
Photo: Hyundai Motor Group
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