Would car tax be fairer if we paid it by the mile?

Callum Rimmer's profile picture
Callum Rimmer

New car tax rates are coming in for cars bought after the 1st April 2017. But why should people that drive less still pay the same tax as everyone else?

On April 1st, the Government is changing the way vehicles are taxed, though the new rules will only apply if you’re buying a new car. We won’t go into the specifics on how the new tax rates work here, but the new tax bands for Vehicle Excise Duty (known as VED) will make it much less cost-effective to own a hybrid vehicle, and even more expensive to run low-emission petrol or diesel cars. Basically, unless you’re buying a purely electric vehicle costing under £40,000, then running a new car will probably cost more after April.

Great little animation by the DVLA explaining the new rates:

We think our car tax system is broken, and it’s been broken for a long time. Despite the upcoming changes, we’re still using a one-size-fits-all approach that taxes everyone a fixed amount, no matter how much they use their car.

We don’t think that’s fair. High mileage drivers generate more emissions and cause more wear-and-tear to our highways; they should pay more towards the upkeep of our roads.

The Government planned to establish a road fund by 2020, reviving the ‘road tax’ that Winston Churchill abolished in 1937. This means car tax would actually be spent specifically on road maintenance and transport infrastructure, which would benefit all road users.

What we want

We are asking the Government for:

  1. Introduce a pay-per-mile road tax instead of a fixed amount regardless of how much people use the roads
  2. Push ahead with the road fund to make sure that all road tax is ring-fenced for our transport infrastructure

Sign our petition asking Chris Grayling, Transport Secretary to investigate pay-per-mile car tax.

Fuel for thought

You wouldn’t expect to pay tax on food you didn’t buy or money you didn’t earn. So why should driving be any different? Of course it would be simpler if car tax were just added to the tax we already pay on petrol or diesel, but as more alternatively powered vehicles join our roads, we have to get a bit smarter. After all, electric cars contribute to potholes too.

We think it would be fairer to charge car tax by the mile.

Pay-per-mile road tax is already being trialled by some states in the US and is used to charge heavy goods vehicles in some European countries. In the UK, motorists with cars over three years old already provide the DVLA with annual mileage readings during an MOT. Why not use this information to calculate their tax bill and charge them their car tax at the same time?

We’ve pulled together three reasons why we think a pay-per-mile car tax could save drivers money, improve congestion and help save the planet.

1. Better for your wallet

Compared to the Government’s new regulations, we believe a pay-as-you-drive car tax would save many drivers money. For example, if you live near a city, you probably only drive occasionally or travel short distances. Why should you be paying the same level of car tax as a travelling salesman whose motorway journeys clock up hundreds of miles each day?

For the frugal money saver, having the tax rate linked to mileage would give you the control to lower your tax bill if you wanted.

2. Better for the roads

A pay-per-mile car tax system would help tackle traffic congestion. In 2008, a survey from the Institution of Civil Engineers showed that 60% of British motorists would prefer car tax to be charged by the mile, with over half of respondents saying that a pay-per-mile system would make them drive less. That’s got to be a good thing.

If all drivers were charged per mile, regardless of their vehicle type, everyone on the road would pay a fair contribution.

3. Better for the environment

Charging car tax by the mile would persuade people to drive less and encourage more car sharing. This means lower CO2 and nitrous oxide emissions, resulting in cleaner air for everyone.

A pay-per-mile tariff could still include different tax bands to reward people driving more carbon-efficient or electric cars. But with contributions coming from all of the cars on the road, more money could go into providing better public transport, which in turn would lower congestion and cut carbon emissions.

Taking our plan to Parliament

We’re not claiming to have all the answers, but we think a different approach to car tax is worth investigating further. We think it’s time to move towards a more modern, fairer model for car tax, and we’ve launched a petition asking the Transport Secretary, Chris Grayling, to consider it.

How many miles do you drive?

Find out exactly how many miles you drive using the free By Miles calculator.

Sign our petition asking Chris Grayling, Transport Secretary to investigate pay-per-mile car tax.

Car Tax Petition

Join the debate! Let us know what you think on Twitter, #FairerByMiles.