The government’s new pay-per-mile tax on EVs is confirmed to include plug-in hybrid cars.
The news was revealed within documents released in error by the Office for Budget Responsibility (OBR) ahead of today’s budget.
It also forecast the the new tax will cut EV sales by 440,000 between now to March 2031.
The new tax is being brough in as part of an effort to claw back lost revenue from the duty imposed on petrol and diesel, as motorists transition away from ICE vehicles.
The levy is set at 3p per mile driven in an EV and 1.5p for a plug-in hybrid. This will come into effect from April 2028.
The OBR forecasts the Treasury will raise £1.1 billion in the 2028-29 tax year, raising to £1.9bn by 2030-31.
However, “the new charge is likely to reduce demand for electric cars as it increases their lifetime cost” explained the OBR.
This will be offset, however, by 130,000 of increased sales as a result of the Electric Car Grant – the new EV incentive announced in August.
The OBR warned that the decrease in demand resulting from the new road tax will make it harder for car makers to hit the government’s ZEV mandate. This requires a EV sales mix of 28% this year, rising to 80% by 2030.
As such, it notes that “to meet the mandate, manufacturers would therefore need to respond through lowering prices or reducing sales of non-EV vehicles”.
This is a breaking news story. More updates will follow.
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