Budget 2025: Pay-per-mile Road Tax for EVs and PHEVs Officially Approved
The UK government has recently approved a significant change for electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) as part of its Budget 2025 plans. This new directive introduces a pay-per-mile road tax aimed at promoting fairer taxation of road usage.
Overview of Pay-Per-Mile Road Tax
The newly approved pay-per-mile road tax will affect motorists using EVs and PHEVs. This tax strategy intends to ensure that all vehicle users contribute to road maintenance costs based on their usage levels, creating a more equitable system.
Key Features
- Implementation of a pay-per-mile tax will commence in the coming budget year.
- This policy aims to ensure EV and PHEV drivers contribute to infrastructure maintenance.
- It is expected to foster competition and transparency in fuel pricing for traditional vehicles as well.
Changes to Employee Car Ownership Schemes
Alongside the new road tax, the government has announced a postponement of proposed changes to the employee car ownership schemes (ECOS) until 2030. This scheme currently allows employees to purchase new cars at reduced prices, benefiting from low repayment costs with minimal or no interest.
Details of ECOS Changes
- The adjustment to bring ECOS under benefit-in-kind (BIK) tax regulations was originally set for April 6, 2026.
- ECOS accounts for approximately 100,000 registrations annually, which represents 5% of the UK’s new car market.
- The delay is aimed at allowing the automotive sector adequate time to adapt to the new regulations.
Government’s Commitment to Fair Pricing
The government’s latest initiatives also include measures to enhance fuel price transparency. New rules will require petrol stations to display real-time price information, enabling consumers to identify the most competitive fuel prices. This move is projected to save average households around £40 each year.
As travel costs remain a concern for many, these changes reflect the government’s commitment to assist households and ensure an equitable approach to road taxation and vehicle ownership schemes.
