'Pay as you drive' - a new era for UK drivers?

We’re hearing a lot about the potential shift from the traditional road tax system to a ‘pay per mile’ scheme under the new Labour Government.

Although this change has been ruled out for the upcoming Autumn budget, the conversation around it may resurface in the future.

Let’s dive into what this would mean for UK drivers:

What is a ‘pay per mile’ system?

As the name suggests, this system charges drivers based on the number of miles they drive each year. The principle is straightforward: more miles driven equals more tax to pay. Countries like Iceland have already implemented similar models.

How would this be administered?

To track mileage accurately, it has been proposed that GPS devices would monitor the distance traveled by each vehicle. This data would then be used to calculate the tax owed, which raises questions about privacy and data security that would need to be addressed.

How much tax would I need to pay?

While specific figures remain unconfirmed, there are discussions around potential rates. Some estimates suggest a charge of 6p plus VAT per mile to offset losses in fuel duty revenue, especially as more people transition to electric vehicles. However, some experts believe the tax could go as high as 15p per mile.

For context, the average annual mileage for UK drivers is around 7,400 miles. At a rate of 6p plus VAT per mile, that would result in an annual tax charge of approximately £532.80.

Implications for drivers.

Increased costs

Many drivers may find their annual costs rising significantly, especially those with longer commutes.

Incentives for change

This model could encourage reduced driving and more reliance on public transport, helping to reduce CO2 emissions.

Infrastructure funding

Revenue generated could be reinvested into maintaining and improving road networks, benefiting all road users.

Final thoughts

Whether or not this scheme becomes a reality, it’s clear that road tax is a topic that deserves our attention. What are your thoughts? Are you in favour of this potential new process? 💭