The introduction of new car tax rules is poised to burden businesses with an estimated cost of £260 million, following the Labour government’s announcement of pay-per-mile charges. The British Vehicle Rental and Leasing Association (BVRLA) projects that by 2027, its members will be operating 1.5 million electric and plug-in hybrid vehicles.
A recent analysis reveals that fleets will face approximately £75 million in direct administrative expenses due to the upcoming regulations. Labour Party Chancellor Rachel Reeves confirmed these changes in last year’s Autumn Budget, with the Electric Vehicle Excise Duty (eVED) set to be implemented from 2028.
Under the new system, electric vehicle owners will be charged three pence per mile, while hybrid vehicles will incur a 1.5p per mile fee. This aims to account for road wear caused by vehicles that currently pay little or no fuel duty.
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Toby Poston, CEO of the BVRLA, criticized the policy during a Transport Committee hearing on advancing the electric vehicle transition. He described it as “extremely hostile” to businesses operating fleets, emphasizing that it represents a significant operational cost rather than a marginal one.
“This policy introduces unnecessary friction into an industry already committed to decarbonisation efforts,” Poston explained. “The costs will inevitably impact businesses and consumers who depend on these vehicles daily.”
Fiona Howarth, founder and director of Octopus Electric Vehicles, echoed these concerns. Labeling the pay-per-mile tax as “the wrong tax at the wrong time,” she warned that the measure could hinder, rather than help, the shift toward electric vehicles.
With ongoing uncertainty around oil prices and supply, critics argue that now is the time to accelerate EV adoption, not complicate it with additional charges. Reeves’ own forecasts predict the pay-per-mile system will cost fleet operators around £250 million annually by 2028. The added complexity and expenses may dissuade drivers just as electric vehicles are gaining traction as a simpler and more attractive option.