Pay-per-mile road car tax: what you need to know for 2024

What is the pay-per-mile scheme and what could it mean for UK drivers?

This guide was last updated July 2024

What is pay-per-mile?

There's plenty of news about the UK introducing a pay-per-mile charging system - but how would pay-per-mile work?

It’s all to do with the anticipated tax shortfall that’s incoming as motorists continue to switch to electric vehicles before the ban on sales of new petrol and diesel cars.

Thanks to the reduced rates or free tax of electric cars, income from road tax has already taken a hit as EV sales rise.

So, Ministers in the transport committee are reportedly planning on introducing a road pricing network to claw back some of that lost money.

The system would replace the current Vehicle Excise Duty (VED) car tax system currently in place, meaning drivers will instead pay tax based on their annual mileage.

Will you pay more?

In theory, no.

Ministers in the cross-party Commons transport select committee claim that motorists could expect to pay about the same as they currently do in car tax (aka vehicle excise duty) per year, because the pay-per-mile rates will reflect not only how much you travel, but also how ‘clean’ your car is.

Lower polluting cars will get lower rates, much like they do in the current tax system, although electric car owners would no longer be able to avoid paying.

Why is pay-per-mile being considered?

Using a pay-per-mile system will not only generate the income needed to cover the expected drop in road tax, we’re told it will put drivers off using unnecessary cars of all types.

This would help to reduce congestion, especially if proposed variable rates of road charging were used, with high-traffic hours costing more than low-traffic ones.

When could pay-per-mile happen?

The committee had called for the UK Government Treasury and Department for Transport to establish a body to develop a scheme by the end of 2022.

But, actual implementation is likely to take much longer.

Not only would it be an enormous challenge to roll out enough numberplate recognition cameras on the UK’s road network to make such a digital system work, Sadiq Khan – who has previously flirted with the idea of a similar system for London – has suggested the technology isn’t quite ready yet.

The RAC Foundation, a UK motoring think tank, is in support of a road pricing system to cover the tax shortfall but warned in a statement that there’s “the temptation to create an over-complex system that’s expensive to run”.

Cutting-edge technology will be vital in ensuring things run smoothly, both for the division in charge of managing the system, and for the motorists paying to use it.

Will road pricing force me to drive a different car?

Car buying decisions are unlikely to be impacted by the road pricing system as annual costs aren't expected to change.

Switching to an electric car might be less appealing as their tax-free status is replaced by the road charges.

However, they'll still be a popular option as the planned ban for petrol and diesel models gets closer.

Rest assured, used petrol and diesel cars will remain legal beyond 2035, which means there’s no need to worry – you’re still free to choose whatever car type you like.

In summary:

There are no official plans for pay-per-mile in place as of July 2024
You'll still be able to buy used petrol and diesel cars after the planned new fuel car ban
It's thought there won't be any big changes to the costs of using the roads
Lower emissions cars will be the cheapest for running costs
The idea for pay-per-mile charges aims to keep electric car drivers paying tax