Diesel drivers are set to face pay-per-mile charges averaging 15p, as part of Labour’s new transport taxation plan spearheaded by Rachel Reeves. This comes alongside a proposed 3p per mile charge for electric vehicle (EV) owners, signaling a shift in how road usage is taxed in the UK.
According to analysis by NimbleFins, fuel costs vary significantly depending on engine size. Diesel cars with engines up to 1600 cc currently incur costs of around 13p per mile. This rises to 14.2p per mile for those with engines between 1601 cc and 2000 cc, and climbs further to 16.3p per mile for vehicles over 2000 cc, averaging out to roughly 15p per mile.
NimbleFins explains, “Fuel costs for petrol cars range from 13p to 18p per mile, while diesel vehicles fall between 13p and 16p per mile. These expenses are approximately 50% to 90% higher than the cost per mile of running an electric car, even when using a standard electricity tariff.”
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The variation largely depends on engine capacity and fuel efficiency; larger engines with higher horsepower consume more fuel and therefore cost more per mile.
The Chancellor’s proposed pay-per-mile scheme, expected to launch in 2028 following the upcoming Budget, aims to promote fairness by charging motorists based on the distance they drive rather than a flat fuel duty. Currently, petrol drivers pay roughly £600 annually in fuel duty, a charge not applied to EV drivers.
Under Reeves’ proposal, electric vehicle owners would face a 3p per mile charge, resulting in an average annual cost of about £250. Critics argue this approach undermines government grants for EVs, with concerns voiced that the plan may simply be a way to offset lost tax revenue.
A source cited by The Telegraph remarked, “When Labour offers grants on one hand and then imposes a pay-per-mile tax on the other, it shows a lack of coherent policy. It comes across as a revenue patch rather than a strategic move.”
The impact of similar policies is already evident abroad. In New Zealand, the announcement of a pay-per-mile scheme contributed to a decline of EV and hybrid sales from nearly 70% of new vehicles in December 2023 to under 50% by April 2024.