Is pay-per-mile vehicle tax on its way?

A new pay-per-mile scheme could replace vehicle tax as we know it. With an approximate £35 billion tax shortfall as electric car ownership rises, the Centre for Policy Studies reimagines the current system in their recent report, The Future of Driving.

The proposed scheme aims to tackle the problem of congestion and its negative environmental impact as well as introducing tax for electric vehicles, which – for now – get a tax break.

How would a pay-per-mile system work?

With the aim of discouraging unnecessary journeys, the per-mile rate would vary according to a number of factors: high-traffic hours would cost more than low-traffic hours, while zero-emissions cars would have a lower rate than petrol or diesel cars with higher emissions.

Everyone would also receive a free mile allowance, which would vary based on post code – with rural areas receiving more than urban areas, where there’s plenty of alternative transport available.

“There are a variety of technological options that could be used to implement such a scheme, ranging from submitting your mileage manually, to an on-board device that transmits mileage automatically, or high-tech GPS tracking. Drivers should be allowed to choose the method that they’re most comfortable with.”¹

We’re a long way from this new scheme being introduced; the technology needs to be ready for mass uptake, for one thing.

Will it cost more?

While the new scheme would get rid of the option to pay annually, the total cost for the year isn’t likely to be any more expensive. In fact, a low-mileage driver or those make an effort to drive mindfully will likely pay less.

Usage-based payment methods continue to grow in popularity and, as the average annual mileage for UK drivers keeps dropping, it’s a model that people are already benefitting from with pay-per-mile insurance.

Ticker’s pay-per-mile insurance helps low-mileage drivers save by only paying for the miles they actually drive. It’s one upfront fee to protect your car when it’s parked, then just pay for the miles you drive each month.

The drivers with the lowest impact on our environment should be getting lower insurance costs – and now perhaps lower tax costs, too.

¹Centre for Policy Studies, The Future of Driving