Pay-per-mile car tax changes ruled out by Rachel Reeves as drivers face uncertain future

Experts have touted the use of pay-per-mile car taxes as a way to claw back revenue from the dwindling pot of fuel duty, especially as millions consider ditching petrol and diesel in favour of electric.

However, it has now been confirmed that the Government will not introduce road pricing as Chancellor Rachel Reeves failed to mention the changes during her Autumn Statement speech this afternoon.

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Prior to the Budget, an HM Treasury spokesperson told GB News: "We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets."

Despite the tax system being ruled out, in the lead-up to the Budget many organisations highlighted the benefits the pay-per-mile system could have with one expert stating it would reduce costs for drivers.

Policy Exchange noted that the introduction of pay-per-mile taxes would save the Government between £15billion and £30billion annually while also saving drivers roughly £200 per year.

In the foreword of the report by the think tank, Edmund King, president of the AA, said: “It is time for the country and our politicians to start seriously debating how we fund roads and sustainable transport in the future.

“It offers attractive possibilities to make the tax system more flexible and responsive to the needs of road users. For instance, it could offer free credits or compensation for excessive or overrunning roadworks.”

While car tax changes have been ruled out for now, the Government will still go ahead with new rules in the 2025 financial year, which will impact hundreds of thousands of electric car drivers.

From April 1, 2025, zero-emission cars will pay the lowest first-year rate. Rates for cars with CO2 emissions of 1 to 50 grams per kilometre and 51-75g/km, including hybrid vehicles, will increase to bring them closer to higher emitting cars.

Cars in the bands for CO2 emissions of 76-90g/km and above will pay double the equivalent rates from 2024 to 2025.

Drivers of new electric vehicles which have a list price of more than £40,000 are expected to pay the expensive car supplement from the second tax payment onwards, which is currently set at £410.

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