The UK’s car tax system will have to be “fundamentally redesigned” as the UK transitions away from petrol and diesel cars, according to politicians.
A new study from the House of Lords Environment and Climate Change Committee suggested major changes were needed to give motorists a “clear steer” on future motoring costs.
The latest ‘EV strategy: rapid recharge needed’ report even suggested a pay-per-mile road pricing charge needed to be considered.
Politicians have claimed the issue is now a matter of “urgency” as more road users transition away from internal combustion vehicles to electric models.
EV owners are still exempt from paying most motoring charges including Vehicle Excise Duty (VED) and fuel duty rates.
The report reads: “It is crucial that the Government considers road taxation alongside other fiscal measures taken to drive EV uptake, giving consumers a clear and consistent steer on future total motoring costs.
“As the UK transitions away from petrol and diesel vehicles, road taxation will need to be fundamentally redesigned, including issues like road pricing.
“We support the conclusions of the House of Commons Transport Committee’s January 2022 report that comprehensive reform of road taxation is needed, to start an honest conversation with the public and work towards a system that is seen as fair and enjoys public acceptance.
“We note the urgency of this has only increased in the intervening two years. In response to this report, the Government should urgently provide a progress update on work in this area.”
Although electric car owners will have to pay some VED fees from April 2025, these charges are still expected to be a lot lower than combustion vehicle costs.
Meanwhile, the Treasury is expecting to take a massive hit in fuel duty rates over the coming years.
Chiefs currently expect to take in £24.3billion of fuel duty in 2023/24 but revenues could drop by £13billion between now and 2030.
The House of Lords study made clear that the Government needed to start an “urgent review” of the current car tax system.
The report added: “The shift from petrol and diesel to EVs—currently exempt from fuel duty, congestion charging and vehicle excise duty—necessitates a radical rethink of road taxation.”
