What Is Pay-Per-Mile Road Tax?

Pay-per-mile car tax is something that has been on the agenda of drivers and government for a few years now, but what is it? We’ve taken a look at what pay-per-mile car tax is, and how Rachel Reeve’s 2024 budget will impact this government policy.

👉 Pay-per-mile car tax explained
👉 The positives and negatives of pay-per-mile road tax
👉 The current state of play
👉 Conclusion

Pay-Per-Mile Car Tax Explained

To understand pay-per-mile car tax, let’s look at how car tax works now. As of October 2024, car taxes favour electric and hybrid vehicles. In most cases, you won’t have to pay as much car tax or even any compared to petrol and diesel drivers. As time has gone on, more and more drivers have chosen EVs and hybrids and benefitted from lower car tax. This has meant that the government is at risk of losing out on millions of pounds that would be invested back into our roads. With this in mind, car tax changes are set to come in 2025, but this hasn’t stopped people from talking about a pay-per-mile road tax being added, too. The pay-per-mile tax is simple, the more you drive, the more you are taxed. This policy looks to charge tax for every mile you complete, which some see as a fairer way of deciding car tax rates.

It's unsure, though, how this policy would be rolled out. The current preferred methods are GPS-tracking or reporting your mileage yourself at certain times of the year, but these both have their risks, such as issues in fitting GPS to all cars and risks of customers lying about their mileage to bring down tax costs.

The Positives And Negatives Of Pay-Per-Mile Road Tax

Positives:

• Fairer to many drivers – the more you drive, the more you pay.
• Make sure the government can still bring in funds that can be used to improve our roads.
• Help cut down on unnecessary trips, which can have a positive effect on the environment.
• Encourages people to change their way of getting around. Carpooling to work or using public transport can help the environment and ease traffic congestion.

Negatives:

• If you rely on a car to get from A to B, this tax could seem harsh and unfair.
• This could actually put people off driving altogether, leading to a drop in car demand.
• New EV drivers could feel unfairly treated compared to past EV owners who didn’t have to pay a road tax.

The Current State Of Play

Pay-per-mile car tax is not currently in place, and this is set to remain the case, with Rachel Reeve’s budget not mentioning anything about a pay-per-mile car tax. Autotrader actually reached out to the government, and were told that a pay-per-mile tax is not currently on the agenda. It’s clear that pay-per-mile road tax isn’t on the minds of the government right now, and upcoming tax changes in 2025 should be the area for drivers to read up on. Although pay-per-mile tax isn’t on the cards anytime soon, it’s definitely one to keep an eye on.

Conclusion

Whatever the future holds for pay-per-mile road tax, it’s clear that there are mixed feelings towards it. If the measure is to come back in future, there needs to be awareness of those who rely on cars, like the elderly, disabled or people living in remote areas. Making provisions for these groups of people would make the pay-per-mile tax policy fairer.

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