Electric cars can be GPS-tracked for Rachel Reeves’ eVED tax sting – and 3p-a-mile rates will rise with inflation despite 15-year fuel duty freeze

The Government has reaffirmed its commitment to taxing electric car owners for every mile they drive and revealed that vehicles could be tracked to calculate annual payments.

The Treasury on Monday published its response to a public consultation that saw more than 5,000 stakeholders raise concerns about the controversial electric vehicle excise duty (eVED) scheme announced by Chancellor Rachel Reeves in the Autumn Budget.

The eVED system will require EV owners to pay 3p for every mile driven from April 2028. Motorists with plug-in hybrid vehicles (PHEVs) – which run on both electricity and conventional fuels – will pay a reduced rate of 1.5p per mile.

The additional tax, on top of conventional vehicle excise duty, is intended to mirror the contribution petrol and diesel drivers make through fuel duty, according to the Treasury.

Under the plans, motorists will make payments based on forecast annual mileage, with the figures verified using MOT records.

However, the consultation response also confirms for the first time that drivers will be able to opt into a system that uses vehicle connectivity technology to provide GPS-tracked mileage, avoiding the need for manual estimates.

The Treasury also confirmed that mileage rates will rise annually in line with Consumer Prices Index (CPI) inflation from 2029.

That is likely to anger some EV owners, particularly as fuel duty on petrol and diesel has remained frozen for 15 consecutive years and has been subject to a ‘temporary’ 5p-per-litre cut since 2022.

The Government says the road-charging system is needed to ensure that ‘EV and PHEV drivers make their fair contribution to the public finances as fuel duty revenues decline’.

But motorists, industry experts and businesses have warned that the policy could cause a roadblock to EV adoption and undermine the Government’s net-zero ambitions.

Concerns raised during the consultation included the accuracy of drivers estimating annual mileage, the burden on MOT centres and the possibility of motorists being charged for journeys driven overseas.

Critics have also warned that the system could create new opportunities for mileage fraud through vehicle-clocking technology.

Despite these objections, the Treasury said it ‘remains committed to introducing eVED from April 2028’.

In total, 5,133 responses were submitted to the consultation. The vast majority (92 per cent) came from individual members of the public, although businesses, academics, charities and motoring organisations also took part.

According to the Treasury, common themes and concerns were identified using HM Treasury’s ‘AI-assisted consultation tool’.

GPS tracking and inflation-linked increases

The most significant developments in the consultation response relate to mileage tracking and future rate increases.

For years, some government advisers have advocated the use of telematics or black-box systems to monitor vehicle mileage. However, privacy concerns have led to strong opposition from many MPs and motorists.

The original eVED consultation document stated that the Government would not mandate telematics technology but remained open to using various forms of technology on an opt-in basis to reduce administrative burdens.

Monday’s response provides more detail, confirming that any voluntary system would rely on a vehicle’s built-in connectivity features, allowing mileage information to be GPS tracked and transmitted through 4G or 5G networks.

‘Making use of mileage data that cars already report will be optional, but those that do opt in will benefit from a quicker, easier-to-use and more flexible system,’ the Treasury said.

The Government also reiterated that the 3p-per-mile rate will be uprated from 2029-30 and in future years in line with CPI inflation to ensure that the tax maintains its real-terms value.

While annual inflation-linked increases are common across many taxes, fuel duty has not risen for more than a decade despite previous intentions for it to increase in line with inflation.

Two changes to the original proposal

The consultation has resulted in only two meaningful changes to the scheme outlined by the Chancellor.

The first is the removal of garage-based mileage checks for newer EVs and plug-in hybrids.

Under the original proposals, vehicles under three years old – which are exempt from annual MOT testing – would still have been required to attend a testing centre every year for mileage verification.

Instead, owners will now be asked to provide accurate mileage estimates using guidance and digital tools or share mileage data through their vehicle’s connected systems.

The second change allows business users, finance providers and leasing companies to file bulk mileage estimates across fleets to reduce the administrative burden.

In its response, the Treasury said: ‘The Government considers that the design [of the eVED scheme] strikes an appropriate balance between supporting a fair and sustainable motoring tax system and maintaining incentives for the uptake of electric vehicles.’

Toby Poston, chief executive of the British Vehicle Rental and Leasing Association, said the changes do little to address wider concerns.

‘There is no avoiding the fact that you can’t create a smooth switch to electric vehicles by making them more expensive to own,’ he said.

‘The mechanics of the tax may have improved, but the timing is still wrong.’

Weak plan to tackle mileage fraud

One of the biggest concerns raised by critics is that eVED compliance relies almost entirely on odometer readings recorded during MOT tests.

That leaves the system vulnerable to mileage fraud, commonly known as vehicle clocking.

The availability of so-called mileage blockers – also marketed as mileage freezers – has increased significantly in recent years. These devices are typically used to artificially suppress recorded mileage, either to boost a vehicle’s resale value or help motorists remain within mileage limits on finance agreements.

Sellers generally claim the products are intended for off-road or research purposes only, allowing them to exploit legal loopholes.

However, investigations by the Daily Mail and This is Money found some devices being advertised as ‘totally untraceable’ and ’99 per cent undetectable’.

Unlike traditional clocking methods, mileage blockers do not roll back an odometer. Instead, they prevent mileage from being recorded while the vehicle is in use.

The effect is not limited to the dashboard display. The technology can also stop mileage being logged within the vehicle’s electronic control systems, making the discrepancy difficult to detect during MOT tests or servicing.

Vehicle history-check companies, including CarVertical and HPI, estimate that around 2.3 per cent of UK vehicles already show signs of mileage manipulation.

The Government says it plans to introduce a legal requirement for vehicles to have functioning odometers, create offences for odometer tampering and prohibit the supply or installation of devices designed to manipulate mileage readings.

It also intends to give the DVSA, DVLA and police powers to require vehicles to undergo examination where there is reasonable suspicion of odometer fraud.

However, the Treasury said such powers are unlikely to be used frequently because safeguards will include confirmation of user-supplied mileage against MOT records and the use of algorithms intended to identify suspicious patterns.

This ad-hoc approach to checking for mileage fraud risks underestimating the growing scale and sophistication of vehicle-clocking technology.

Other concerns raised about eVED

Experts have also highlighted issues with eVED liabilities being attached to vehicles rather than individual motorists.

Under the proposals, mileage credits would transfer with a vehicle when it is sold, while there would initially be no refund mechanism for vehicles declared off the road through a Statutory Off Road Notification (SORN).

The Government has also ruled out applying higher rates to motorists who drive longer distances and reduced charges for those who live in rural areas with little to no access to public transport.

It further confirmed that mileage accumulated overseas will still count towards annual eVED liabilities, meaning UK motorists could effectively be taxed for driving abroad.

The Treasury says that excluding overseas mileage would require more intrusive monitoring and therefore conflict with efforts to protect motorists’ privacy.

Ben Nelmes, chief executive of green think tank New AutoMotive, warned that the policy could become politically problematic.

The pay-per-mile system for EVs and PHEVs, he said, ‘risks becoming an albatross around the neck of the next Chancellor and transport secretary’.

He added: ‘It is absurd that families heading off on holiday will be taxed by the UK Government for driving on French roads.

‘It is staggering that the DVLA’s legacy computer systems are unable even to process a simple automatic refund when someone sells or scraps their car. That in itself should be a massive red flag for the incoming Government about the deliverability of this policy.’