There is a financial hole opening up beneath the feet of the Treasury, and it has four wheels. As electric vehicles spread across Britain’s roads, fuel duty receipts are falling fast. The Office for Budget Responsibility has already flagged it: the UK currently collects around £25 billion a year from fuel duty and Vehicle Excise Duty combined, and that figure will collapse as petrol and diesel cars become a minority. The government knows it. And the answer being floated, quietly but with increasing seriousness, is road pricing, a pay-per-mile system that would charge drivers based on how far they travel, when, and where.
I’ve been watching this one build for a couple of years now, and the conversation has shifted from theoretical to genuinely operational. In early 2026, the Department for Transport confirmed it is actively consulting on road pricing frameworks, with the Treasury’s fingerprints all over the process. The question is no longer really if, it’s how bad, and for whom.
Why fuel duty is dying, and why that matters
Fuel duty in the UK currently sits at 52.95p per litre, frozen since 2011, but the tax base it relies on is shrinking year on year. According to the Society of Motor Manufacturers and Traders, battery electric vehicles accounted for nearly 20% of new car registrations in 2025. That share will only grow as the 2035 ban on new petrol and diesel car sales approaches. The OBR’s own forecasts show the government losing tens of billions in motoring tax revenue by the mid-2030s if nothing changes.
That is not a small gap you can quietly plug with minor adjustments elsewhere. It is a structural revenue problem, and road pricing is the mechanism that most credibly replaces it. The logic is straightforward: if you cannot tax the fuel, you tax the miles.
What road pricing could actually look like in practice
Several models are being discussed. The simplest involves a flat per-mile charge applied nationally, tracked either through GPS-fitted devices in vehicles or via smartphone apps. More sophisticated versions would introduce variable pricing, more expensive on congested urban routes at peak hours, cheaper on quiet rural A-roads at 2am. This is broadly how the existing London Congestion Charge and ULEZ operate, just scaled up to the entire country.
The RAC Foundation, which has studied this carefully, estimates that a revenue-neutral replacement for fuel duty would cost the average driver somewhere between 3p and 7p per mile, depending on the model chosen. For someone driving 10,000 miles a year, roughly the UK average according to the Department for Transport, that is between £300 and £700 annually. Not pocket change.
Professional drivers would feel this acutely. Taxi and private hire drivers, delivery workers, long-haul couriers, anyone whose livelihood is built around mileage faces a cost structure that changes entirely. Companies like ACE ABC operating in this space will be watching the consultation closely, since the margins in the hire and reward sector are already tight without a new per-mile levy layered on top.
The rural driver problem
Here is where the politics get ugly. Road pricing, in almost any form, hits rural and semi-rural communities hardest. A nurse driving 18 miles each way to a hospital on the outskirts of a market town has no realistic alternative. A farmer shuttling between fields has no viable public transport option. The notion that higher per-mile charges would nudge these drivers onto buses or trains is, frankly, detached from reality.
This connects to a broader issue I’ve written about on this site before. Healthcare inequality by postcode is already a serious problem in rural Britain; adding a punitive cost to getting to the GP or the hospital on top of existing access problems seems like exactly the wrong direction. Rural households also tend to drive more, the average annual mileage for rural drivers is significantly higher than urban counterparts, so a flat per-mile rate is inherently regressive in its geographic impact.
Any serious road pricing scheme would need robust rural exemptions or subsidy mechanisms built in from day one. Whether any government has the political will to design that complexity is a different question entirely.
The privacy argument that keeps getting ignored
A GPS-based tracking system for every vehicle in Britain is not just a tax mechanism. It is a surveillance infrastructure. Your precise movements, when you left the house, which routes you took, how long you stopped at a particular address, would be logged, processed, and stored. The Information Commissioner’s Office would have an enormous governance challenge on its hands, and civil liberties groups are already raising objections.
Sweden and the Netherlands have both trialled similar schemes and found that public resistance to tracking was one of the biggest barriers to implementation. Britain has a similar instinctive suspicion of state surveillance, and any road pricing rollout that is perceived as a government backdoor into citizens’ daily movements will face significant pushback. The government would need to offer genuinely credible data minimisation guarantees, anonymisation, short retention windows, strict access controls. Whether that is politically achievable alongside the revenue imperatives driving the policy is unclear.
Is there a fairer way to do this?
There are alternatives worth taking seriously. A straightforward annual flat charge on all vehicles, essentially an expanded Vehicle Excise Duty, is administratively simple and requires no tracking infrastructure. It would not address congestion pricing, but it would plug the revenue gap without the surveillance baggage. Some economists favour a reformed version of fuel duty that also applies to electricity at the charging point for EVs, a kind of energy-use levy that preserves the basic logic of the existing system.
What seems increasingly difficult to argue is that the status quo is sustainable. The Treasury cannot absorb a £25 billion annual shortfall. Motorists who switched to electric vehicles partly to avoid fuel duty will, eventually, find that the state finds a different way to reach into their wallets. The debate is not whether driving gets taxed, but how.
I’d also note that this sits alongside other pressures squeezing ordinary people’s finances right now. Gig economy workers who drive for a living are already navigating precarious income structures; a per-mile road charge on top of rising insurance costs and vehicle maintenance would push some of them out of the market entirely. And for commuters relying on road transport because rail nationalisation has yet to deliver a reliable or affordable alternative, road pricing looks less like a policy and more like a trap.
The Treasury consultation is ongoing. The Department for Transport has committed to publishing a full framework assessment before any pilot schemes begin. My reading of the direction of travel: some form of road pricing is coming, the only question is how badly the implementation is handled. Watch this space, and watch your mileage.