With the Chancellor widely expected to announce pay-per-mile taxation for electric vehicles in tomorrow's Autumn Budget, a survey of car buyers has warned of the immediate and devastating impact it could have on sales.

Rachel Reeves is set to put the wheels in motion for 'road pricing' for EVs on Wednesday by confirming a consultation into charging drivers by the mile to offset losses in traditional fuel taxes.

With fuel duty currently generating around £25billion-a-year for the Treasury, MPs have for the last decade been scrambling for a solution to recoup this imminent loss of motoring taxation as the car parc transitions to battery vehicles. 

Strong reports suggest the Chancellor will propose that EV drivers are charged 3p for every mile they cover annually from 2028 in an effort to plug this imminent fiscal black hole.

But the motor industry has blasted the move, saying it provides confusing and mixed messaging around the Government's ambitions to decarbonise road traffic - and could derail the transition to EVs entirely.

This is particularly the case after Treasury insiders at the weekend leaked news that Reeves will pump an additional £1.3billion into the Electric Car Grant (ECG) scheme, which discounts affordable EV models (those costing less than £37,000) by up to £3,750.

On the eve of the Chancellor delivering her statement in the Commons, What Car? said the scheme threatens to 'kill electric car demand' after its poll of 4,368 in-market car buyers revealed that more than half would avoid purchasing an EV if pay-per-mile taxation is rubberstamped.

The pay-per-mile scheme will be in addition to the £195-a-year VED rate electric car drivers pay as of April 2025 under new measures that ended EV exemption from the road tax.

Dubbed by government insiders as 'VED+', EV owners face a total annual tax outlay of £495; £300 in per-mile charges (based on electric car drivers covering 10,000 miles per year on average) on top of the £195 in standard rate VED (which could also increase in April and each subsequent year to 2028).

The scheme would see drivers facing charges of just over £12 for a trip from London to Edinburgh.

Driving 102 miles from Cambridge to Oxford would cost £3, while the 73-mile journey from Liverpool to Leeds will be £2.

According to What Car?'s latest survey, this would deter 52 per cent of current car buyers from going electric.

And more than a third (38 per cent) who are currently in the process of purchasing an EV said they might now reconsider if pay-per-mile taxation is on the cards. 

The study also revealed that only one in five UK motorists think a road pricing scheme for EVs is a 'good idea'.

Overall, two-thirds of the drivers polled don’t think EV owners should have to pay an additional tax, and only 13 per cent would be happy to pay the proposed 3p per mile fee.

Government accused of 'terrible mixed messaging'

On Sunday, the Treasury revealed that Reeves will be pumping more funds into the electric car grant discount scheme to promote EV uptake, as well as announce on Wednesday new measures to accelerate the growth of the public charging network and review charging costs.

With these announcements due to be made alongside pay-per-mile taxation tomorrow, What Car? consumer editor Claire Evans says the Government is sending 'terrible mixed messaging' to the nation's motorists.

'Introducing an additional tax on EVs won’t only be unpopular, it will clearly make many drivers who are intending to buy an EV rethink their plans,' Claire said.

'Coming hot on the heels of the Government’s Electric Car Grant, which stimulated demand for EVs, it sends a terrible mixed message.'

Potentially limiting appetite for electric cars would also create an even bigger uphill battle for car manufacturers, who are required to sell an increasing share of EVs through the Zero Emission Vehicle (ZEV) mandate introduced last year.

Car maker have already shared with the Daily Mail and This is Money that they will struggle to meet the mandated 28 per cent EV share required to avoid fines in 2025 - but already have little hope of meeting the 33 per cent binding target for 2026.

Edmund King, AA president, said pay-per-mile taxation could become a 'poll tax' on electric car owners.

'Whilst we acknowledge the Treasury is losing fuel duty revenue as drivers go electric, the Government has to tread carefully unless their actions slow down the transition to EVs.

'The ZEV mandate for 28 per cent of new car sales to be zero emissions this year will not be met as sales are running at just 22 per cent.

'We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or a poll tax on wheels.'

Having not been consulted about a potential road pricing scheme for EVs, Britain's car manufacturers are unhappy with the leaked suggestions that pay-per-mile could soon be introduced.

A spokesperson for the Society of Motor Manufacturers and Traders told us: 'We recognise the need for a new approach to motoring taxes but at such a pivotal moment in the UK's EV transition, this would be entirely the wrong measure at the wrong time.

'Introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake - deterring consumers and further undermining industry's ability to meet ZEV mandate targets, with significant ramifications for perceptions of the UK as a place to invest.

'A smarter, fair and future-ready taxation system requires a fundamental rethink - one that must be done in full partnership with the industry and other stakeholders.'

Speaking at the SMMT's annual dinner on the eve of the Budget, chief executive Mike Hawes warned that pay-per-mile tax on EVs could 'inflict severe damage' on the car industry.

'Rather than road pricing for EVs, we need to see measures that stimulate consumer demand, so we can deliver the tax revenues, jobs, investment, productivity and growth that is in everyone’s interests,' he said.

Mick Flanagan, the trade body's president, added: 'Every vehicle maker and supplier has invested heavily to create a pipeline full of EV programmes, however, the demand is still not there, the charging infrastructure is not there – and yet the ZEV mandate still demands we sell these vehicles.

'We are at a tipping point in our electrification journey – what we choose to do now will shape our future radically.'

Individual car makers have spoken out against the plans too.

Håkan Samuelsson, chief executive at Volvo Cars, described it as 'definitely bad' during an interview at the beginning of November.

'Don't go from incentivising something and pushing it with legislation to start to put on penalties and tax on top of a positive development,' he added.

Steve Gooding, director of motoring research charity the RAC Foundation, said the Treasury is 'scrambling for a solution' knowing its 'fuel duty cash-cow' will shrink considerably when it bans the sale of new petrol and diesel cars in 2030.

'If the Chancellor is tempted to go down the route of introducing a distance charge for EV drivers but still encourage EV take-up, then she needs to look at how to cut the cost of public charging for the millions of people who don't have the option to charge their cars at home,' he said.

Ian Plummer, chief commercial officer at Auto Trader, warned Ms Reeves to 'think extremely carefully' about the move, adding: 'Drivers respond to incentives and anything that puts up running costs for electric vehicles will slow that momentum.'

James Court, head of policy at Octopus Electric Vehicles, said: 'As we've seen in other countries, introducing a charge now would stifle the growth we've seen over the past years, and be self-defeating.'

David Martell, chief executive at homecharger manufacturer Andersen said: 'A rushed or poorly designed road pricing scheme risks undermining confidence in electric vehicles at a crucial time.

'If the government gets this wrong, it could stall the transition to cleaner transport and damage a growing British industry built around home charging and EV innovation.'