We need pay-by-mile car tax, and we need it now.

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James Blackham

We’ve said it for a long time, but unfortunately it still rings true – the current Vehicle Excise Duty (car tax) system is unfit for purpose and urgently needs reform.

We’re calling for the Government to introduce a fairer, usage-based car tax. 

Why do we need a new car tax system?

It’s not fair that lower mileage drivers, who are often from poorer households, have to subsidise higher mileage drivers because of a flat rate tax. 

Despite the fact that we’re meant to be reducing our carbon footprint, and decreasing the amount of congestion on our roads, there is no incentive to drive less when it comes to car tax. At the moment, drivers are paying a flat rate based on the emissions of their vehicle, whether they drive one mile or one hundred thousand miles. This makes no sense, and does nothing to incentivise high-mileage road users to change their habits. 

There’s a simple switch that could generate six and a half billion pounds overnight, and make the system so much fairer. 

With the average UK driver now covering only 6,600 miles in a year (according to the most recent MOT data released by the Department for Transport) we need to create policies that continue this downward trend of road use and encourage people to take greener alternatives.

Our low-tech proposal will mean that every driver pays a fair rate of tax for the amount of miles they’ve actually driven. 

How would a usage-based system work?

Our system would allow the first 1,000 miles in a year for free, then charge 3p per mile for miles 1,001-7000 and 5p per mile for any miles over 7,001 – up to a maximum chargeable limit of 15,000 miles.  

Based on 2020 MOT data, our model suggests that the Government would collect around £6.5 billion from this method – which is equal to the 2019-20 revenue from this taxation. This means that a usage-based system would bring in as much tax revenue as a flat rate system, whilst ensuring that higher mileage drivers are carrying most of the cost burden for using our roads.

The new method would work by asking drivers to pay an annual fee based on the mileometer reading from their MOT certificate. Following a routine MOT, the motorist would simply need to log in to an online portal and pay for their recorded miles. 

Someone driving the average annual mileage of 6,600 miles could therefore expect a bill in the region of £168. There would be an upper cap at 15,000 miles, meaning the maximum annual charge would be £636.

New vehicle owners, where an MOT is not required for three years, would be required to pay the equivalent of three years of the tax, based on an average of 10,000 miles per year, when they first purchase the car. 

The system can later evolve to charge more or less per mile based on the Co2 emissions or weight of the car – so it takes into account pollution and road damage.

Why it needs to happen now.

If this Government is serious about ‘levelling up’ then low mileage drivers, particularly those from low income households, can’t be ignored. 

Recent research commissioned by By Miles, with support from leading academics, found that households with an average post-tax income of less than £18,000 a year are being disproportionately impacted by a flat rate tax system. These households typically drive 40% fewer miles than those in the higher income bracket, make 17% fewer trips and are priced out of cheaper tax bands that reward more efficient vehicles. It’s imperative that these drivers are not being forced to subside the driving habits of more affluent road users. 

Flat rate car tax doesn’t work for a modern society. Motorists that understand the damaging effects of congestion and pollution should be rewarded for driving less. 

We’re urging the Government to introduce this as soon as possible, to make a greener and fairer future for all of us.

If you agree that car tax would be #BetterByMiles, then lend your voice to our campaign and sign the petition today.