Pay-per-mile road tax: a costly hit for rural drivers?

Update: Have your say in the comments section below.

A new pay-per-mile road tax plan is being discussed again, which would mainly affect people living in rural areas who rely heavily on their cars. The idea is to replace the current Vehicle Excise Duty (VED) with a tax based on how many miles you drive. This would hit rural drivers the hardest, with some facing annual costs of around £600, while the average motorist would pay about £444.

Supporters of the plan argue it could help cover a £22 billion gap in the country’s finances, but it’s likely to face pushback from those who depend on their cars, especially in less populated areas.

The Treasury is eager to find new ways to bring in money as more electric vehicles hit the road, reducing fuel tax revenues. Currently, the government collects around £25 billion from fuel duty and another £8 billion from VED annually, but with over a million EVs on the road in the UK, that income is expected to drop. 

Labour is rumoured to introduce this new road tax system in the upcoming Autumn Budget. Adam Smith, a former chief of staff for ex-Conservative Chancellor Jeremy Hunt, revealed in the Telegraph that the Treasury has been pushing for this kind of scheme for a while.

Critics argue that fuel duty already acts as a tax-per-mile system since drivers pay a set rate per litre of petrol or diesel they use. However, with the rise of EVs, changes are being made to make sure all vehicles are taxed, with even zero-emission cars set to be charged similarly to the least polluting petrol and diesel cars.

Estimates suggest that without a new tax plan, the government could lose £9 billion in fuel tax by 2030, especially as Labour aims to bring forward the ban on new petrol and diesel cars to 2030, compared to the Conservatives’ target of 2035.

The idea of a pay-per-mile system has been floated for a while, and a think tank last year suggested charging drivers 6p per mile. With the average car driving 7,400 miles a year, this would result in an annual cost of around £444, much higher than the current VED rate for most petrol and diesel cars, which is £190.

How do drivers feel about pay-per-mile tax?

In a December 2023 survey by Go Compare of 2,000 drivers, 53% were against a pay-per-mile tax. Most critics felt it would unfairly impact those who rely heavily on their cars, especially in rural areas.

Young drivers, particularly those aged 18 to 24, were the most opposed, with 60% against the idea. On the flip side, 26% of respondents supported the plan, with older drivers (55 and over) being the most favourable. Supporters argued it could create a fairer system and help cut down on unnecessary driving, congestion, and emissions. Some also saw it as a way to potentially lower their own tax bills.

Overall, the proposal is controversial. While some believe it’s a necessary step to make up for lost fuel tax revenue, others warn it could disproportionately harm people who rely on driving the most, particularly in rural and remote areas.

How do you feel about the proposed pay-per-mile road tax? At 6p per mile, would it be costing you more or less money? Let us know in the comments...