There has been a lot of talk recently about ‘pay per mile’. But what is it, where will it be introduced and when?
This page hopes to answer all those questions and more.
I’ll discuss what the pay per mile road taxation idea is, where it might be introduced, when and how it will work.
What is pay per mile road tax?
Pay per mile isn’t a new idea. It has been around for many years but governments have either not been brave enough or not known how to implement it.
The idea is for drivers to pay a form of road tax calculated on the miles driven as opposed to VED (vehicle excise duty) calculated on CO2 emissions and fuel duty (tax added to fuel).
On the surface, it’s a fair tax.
The more miles you drive, the more you pay. So far, so fair.
But dig under the hood a little and it’s not quite so fair. In fact, it’s quite regressive.
We’ll get to why in a minute.
Where will pay per mile be introduced?
If introduced, the pay per mile system will be UK-wide, on all roads in England, Wales, Scotland and presumably Northern Ireland.
When will it be introduced?
The ‘when’ is up in the air right now. The new government needs money and receipts from VED are falling slowly due to electric cars.
Rumour has it that Labour is exploring it now and may pave the way for it in the October 2024 budget. There has been no confirmation of that though.
It probably won’t be active for a while as nobody knows how it will be implemented, tracked or controlled yet.
Challenges of pay per mile taxation
The current version of VED is determined by the amount of CO2 your car emits, which is determined by the government through independent testing.
Fuel duty is a flat fee added at the pump and collected by the government via filling stations.
It’s a relatively simple system that’s working reasonably well.
The more you drive, the more fuel you use, the more tax you pay. It’s a similar principle to what’s bring proposed, with some key differences.
It won’t work forever though.
With the uptake of electric cars (slowly) increasing and the phasing out of internal combustion engines, both VED and fuel duty are on borrowed time.
The government must come up with a new way to raise money from drivers.
That’s why the current system is set to change.
Why is pay per mile not a good solution?
There are several reasons why pay per mile taxation isn’t a great idea. It may be better than nothing, but there are definite downsides.
Regressive taxation
Pay per mile is regressive because there must be a system in place to monitor mileage and that system will cost money.
The current thinking is a monitoring device installed in all cars to count the miles you travel.
Yeah, I know. Yet another way for the government to spy on you. If CCTV and AI traffic cameras weren’t enough, your driving could be monitored too.
The more people that drive, the more monitoring devices will be required, raising the cost of implementing this form of taxation.
With around 33.7 million cars on the road, that’s a lot of monitoring devices!
It’s not only the devices, but also the IT, staff and systems to make sense of the data, bill and manage payments.
As everyone knows, the government doesn’t exactly have a good reputation when it comes to managing large projects!
There are other ideas aside from monitoring devices.
There’s also:
- Annual mileage readings – Presumably at your MOT – Potential for fraud
- Smartphone app – GPS enabled to track miles driven – A privacy nightmare
- GPS device – Similar to a monitoring device – A privacy nightmare
Other ideas may arise closer to the time, but these are the ones I know of.
Blunt instrument
Another reason why pay per mile isn’t a good idea is because it’s a blunt instrument.
If you:
- Must live far from work because of property prices or rent
- Are in low paid work and need to drive
- Work shifts when there’s no public transport
- Live in a rural area with no public transport
- Run a farm with no choice but to use vehicles
You’re being penalised for driving when you literally don’t have a choice.
You’ll also be paying the same, if not more, as the millionaire down the road who drives a huge, inefficient compensator SUV.
Life has enough inequalities as it is without knowingly adding to them!
Removes one of the few reasons to buy electric
Even though VED is being introduced for electric vehicles in 2025, it’s still one of the few reasons left to buy an EV.
If you pay per mile, you’re also going to be paying the same as that fat cat in his luxury SUV polluting the air while you don’t.
That’s hardly fair either.
Pay per mile road taxation
To be fair, the government must do something to bolster shrinking income from the road.
I’m not sure this is the way forward though.
It’s not a fair way to tax, doesn’t reward you for driving electric and will penalise anyone whose livelihood depends on driving to or from work, or for work.
Then there’s the privacy, accuracy, potential for fraud and a series of governments seemingly incapable of delivering projects on time and on budget.
Whatever replaces VED and fuel duty, you can be sure we’ll end up worse off.
No government in recent years has done anything to benefit the average working person and I don’t see that changing anytime soon.
What do you think? Are you okay with pay per mile road pricing?
