Rachel Reeves' new £300 car tax scheme, set to hit road users from April 2028, has one major problem: it will not support automatic refunds, according to a Treasury report on the upcoming electric Vehicle Excise Duty (eVED) system.
How the Pay-Per-Mile Tax Works
The pay-per-mile fee will charge electric car owners 3p per mile and hybrid owners 1.5p per mile. For drivers averaging 10,000 miles per year, that means an annual bill of £300. Motorists will have to estimate their annual mileage, with the real figure calculated at the annual MOT test.
No Automatic Refunds at Launch
The Treasury report explained that the new eVED system “will not support automatic refunds” from the outset. This means road users who over-calculate their travel will have paid more than necessary and will be entitled to some money back, but the process will not be automatic.
The Treasury stated: “The government recognises the benefit of more automated arrangements at the point of lifecycle events, including change of keepership and where a car is scrapped or declared SORN. The new eVED system will not support automatic refunds at launch due to the significant and complex work required to amend the DVLA legacy vehicle systems.”
Mileage Credits Instead of Refunds
Instead of automatic refunds, the Treasury explained that motorists who drive fewer miles than estimated will receive mileage credits that will be carried forward into the next licensing period. These credits will then be offset against future electric VED liabilities.
Criticism from Industry CEO
Ben Nelmes, CEO of New AutoMotive, criticised the decision, saying: “It is staggering that the DVLA's legacy computers 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.”
DVLA Responds
The DVLA responded: “The Government's consultation response sets out that, at launch, the scheme will prioritise carrying credits forward rather than introducing automatic refunds for every possible circumstance. Refunds will also be available in a number of specific situations, including where there has been an unexpected change in financial circumstances. Further details on refunds relating to changes of keeper and other vehicle lifecycle events will be announced later this year.”
