The Problem
The UK raises approximately £33bn per year from motoring taxation — £24.4bn from fuel duty and £8.4bn from VED. Both instruments are structurally failing. Fuel duty has been frozen at 52.95p per litre for 16 years, eroding revenue by a cumulative £120bn in forgone receipts. The accelerating shift to electric vehicles is permanently removing cars from the fuel duty base: BEVs already account for 5.7% of the fleet and 7–8% of car miles, contributing zero fuel duty. Under current trajectories, BEVs will reach 19% of the fleet by 2030 and 40–50% by the mid-2030s, with the ZEV mandate requiring 80% of new car sales to be zero-emission by 2030 and 100% by 2035.
By 2030, on the assumptions that the government continues to fail to increase fuel duty and eVED reaches 4p/mile for BEVs and 2p for PHEVs, the combined revenue picture is:
| Revenue stream | 2024/25 outturn | 2030/31 estimate | Change |
|---|---|---|---|
| Fuel Duty (frozen at 52.95p) | £24.40bn | ~£20.50bn | −£3.90bn |
| VED | £8.40bn | ~£11.50bn | +£3.10bn |
| eVED (4p BEV / 2p PHEV) | — | ~£2.60bn | +£2.60bn |
| Total | £32.80bn | ~£34.60bn | +£1.80bn |
Flat in nominal terms; a real-terms decline of 10–15% after inflation. By the mid-2030s, with BEVs at 40% of the fleet, fuel duty drops toward £12–15bn and the deficit widens to £10bn+ annually. By the mid-2040s, fuel duty revenues approach zero as the last ICE vehicles leave the road.
The underlying problem is not taxation levels but taxation architecture. Fuel duty is an excellent instrument for taxing fossil-fuelled vehicles: it correlates road use with payment, is cheap to collect (embedded in the fuel price), and captures heavier, less efficient vehicles automatically. But it cannot tax vehicles that do not burn fuel. The government's eVED mileage charge, announced for April 2028, is a partial acknowledgement of this problem — but at 3–4p per mile it recovers only a fraction of the fuel duty equivalent and creates yet another overlapping instrument alongside fuel duty and VED.
Road Use Duty replaces eVED with a single, permanent instrument for non-fossil-fuelled vehicles, calibrated to the per-mile fuel duty incidence of the vehicles they replace. Fuel duty and VED continue unchanged for ICE vehicles. No fossil fuel subsidies, no tax cuts on carbon-intensive transport, no political risk from touching fuel duty. The transition is self-executing: as each vehicle switches from fossil fuel to electric power, it drops out of fuel duty and VED and into RUD. Revenue follows the fleet, not a legislative timetable.
The Design Principle
Fuel duty currently costs the average petrol car approximately 6.9p per mile (52.95p per litre ÷ 7.7 miles per litre at 35mpg). A less efficient large vehicle pays more per mile; a more efficient small car pays less. This natural weight and efficiency gradient is the feature that makes fuel duty a well-designed tax.
RUD replicates this gradient for non-fossil vehicles using kerb weight as the proxy — the only vehicle characteristic that correlates with road wear, particulate emissions (tyre and brake), collision severity, and raw material consumption in the way that fuel consumption correlates with carbon emissions. The rates are set to approximate the fuel duty that a comparable ICE vehicle would pay per mile.
| Current ICE fuel duty incidence | Approx. per mile | RUD equivalent |
|---|---|---|
| Small/efficient petrol car (40mpg) | ~6.0p | 7p (standard) |
| Average petrol car (35mpg) | ~6.9p | 7p (standard) |
| Large petrol SUV (25mpg) | ~9.6p | 14p (heavy) |
| Large diesel SUV (30mpg) | ~8.0p | 14p (heavy) |
| Diesel HGV (8mpg) | ~29p | 20p (HGV — below parity, see rationale) |
The rates are not exact matches. The standard rate (7p) slightly overpays relative to efficient small cars and slightly underpays relative to average cars — a deliberate rounding that makes the system simple and memorable. The heavy rate (14p) is exactly double the standard rate, capturing the higher externality of vehicles above 2,000kg. The HGV rate (20p) is deliberately set below the fuel duty equivalent to avoid a freight cost shock at the point of transition; HGV electrification is slower and the revenue stake is smaller.
Rate Structure
All rates in 2025 prices, indexed annually to CPI.
Standard: 7p per mile
Applies to all non-fossil-fuelled vehicles with a kerb weight at or below 2,000kg. This covers:
- Most passenger cars — including the mainstream BEV segment: Tesla Model 3 (1,847kg), VW ID.3 (~1,800kg), Nissan Leaf (~1,800kg), MG4 (~1,685kg), BYD Dolphin (~1,520kg), Peugeot e-208 (~1,530kg). Also covers all conventional-sized hatchbacks, saloons, and compact crossovers in their electric equivalents.
- Small and medium vans — Ford Transit Custom (1,769–1,976kg), Vauxhall Vivaro (1,680–1,850kg), Renault Trafic (1,748–1,836kg), Ford Transit Connect (1,434–1,571kg). The majority of the UK's 5.1m-strong van fleet operates under 2,000kg kerb weight.
- Buses and coaches — all sizes, regardless of weight. Charged at the standard rate to encourage the transition to electric bus fleets. Under the Prosperity 2030 programme, bus fares are abolished and operating costs funded directly by government; bus RUD is absorbed within the transport budget as an operating cost.
- Taxis and private hire vehicles — at their kerb weight tier.
A driver doing 7,000 miles per year pays £490 — approximately 30% below what they would pay in fuel duty alone in a petrol equivalent.
Heavy: 14p per mile
Applies to all non-fossil-fuelled vehicles with a kerb weight exceeding 2,000kg and a gross vehicle weight at or below 3.5 tonnes. Double the standard rate. This captures:
- Large battery electric vehicles — Tesla Model S (2,100kg), Tesla Model X (2,300kg), BMW iX (2,500kg), Mercedes EQS (2,500–2,900kg), Audi e-tron (2,500kg), Polestar 3 (2,584kg), Volvo EX90 (2,818kg). Roughly 55–60% of current BEV models exceed 2,000kg, concentrated in premium and large-SUV segments.
- Large electric vans — Ford E-Transit full-size (2,087–2,459kg), Mercedes eSprinter (2,474kg), VW e-Crafter (2,494kg), Renault Master E-Tech (2,530kg). These are the heavy-duty commercial variants used for longer-distance delivery and trades.
- Heavier PHEVs — those with combined drivetrain and battery weight pushing above the threshold, though this category is declining as PHEVs give way to full BEVs.
The 2,000kg threshold sits above the current fleet-average car weight (~1,600kg) but close to the average weight of new cars tested in 2023 (1,947kg). It targets vehicles at the upper end of the weight distribution where road surface damage, tyre particulate emissions, and pedestrian collision risk are materially higher. Road wear scales approximately with the fourth power of axle weight: a 2,400kg vehicle causes roughly 5× the surface damage of a 1,200kg vehicle.
The "double for heavy" rule is simple to communicate and simple to justify. It preserves a weight incentive for manufacturers without penalising the mainstream EV market — the Tesla Model 3, the UK's best-selling electric car, falls under the threshold.
HGV: 20p per mile
Applies to all non-fossil-fuelled vehicles exceeding 3.5t gross vehicle weight. This covers electric rigid lorries, electric articulated combinations, hydrogen fuel cell HGVs, and any other zero-emission heavy vehicles.
The rate is deliberately set below the fuel duty equivalent (29p per mile for a diesel artic at 8mpg). This reflects three realities: electric HGV adoption is nascent and slower than car electrification (battery weight and range constraints limit current models to shorter routes); the revenue contribution of HGVs to total road taxation is relatively small (£3bn of £33bn); and a revenue-neutral rate would create a freight cost shock at the point of transition that the 20p rate avoids. An HGV covering 50,000 miles per year pays £10,000 — closely matching the current fuel duty incidence of approximately £9,500 for a 44t diesel artic, ensuring revenue neutrality for the haulage sector.
Motorcycles: 3p per mile
Minimal road wear, low emissions weight. 3bn annual miles × 3p = £0.09bn — fiscally minor.
What Does Not Change
Fuel duty remains at 52.95p per litre (or whatever rate is in force at the time of RUD introduction). No cuts, no freezes beyond the existing freeze, no political choreography. Every litre of fossil fuel burned on UK roads continues to be taxed exactly as it is today. Fuel duty revenues decline naturally as the fleet electrifies — this is the intended consequence of the energy transition, not a policy failure.
Vehicle Excise Duty continues for all vehicles paying fuel duty (i.e. ICE vehicles). VED is abolished only for vehicles liable for RUD (i.e. non-fossil vehicles). This means an ICE Range Rover driver sees zero change in their tax position — they pay fuel duty at the pump and VED annually, exactly as they do today. No windfall from the introduction of RUD.
VAT on fuel continues at 20% on petrol and diesel purchases, as now.
The effect is that the existing ICE taxation framework is left entirely undisturbed. RUD is a parallel instrument that applies exclusively to the growing share of the fleet that fuel duty cannot reach.
Plug-in hybrids and range-extended electric vehicles
PHEVs and range-extended EVs (REEVs) are classified as non-fossil vehicles for RUD purposes: they pay RUD on all miles driven and are exempt from VED. When they buy petrol or diesel for their combustion engine, they pay fuel duty at the pump — exactly as any other fuel purchaser does. The two instruments are completely independent and require no reconciliation. The resulting "overlap" on fuel-powered miles is real but modest in practice: a PHEV doing 10,000 miles with half on electric power and half on petrol burns approximately 570 litres, incurring £300 in fuel duty on top of its £700 RUD bill. The combined £1,000 is still below what a pure ICE equivalent pays (£880 in FD+VED before fuel cost). Crucially, the overlap is self-correcting — the more the driver charges electrically, the less fuel duty they pay. A PHEV owner who plugs in diligently pays almost pure RUD; one who relies heavily on the engine pays more fuel duty, which is exactly right because they are burning more fossil fuel. No reclassification, no reporting, no adjustment is needed. If range-extended EVs become more popular as a transitional technology, the same logic applies seamlessly: the fuel duty component shrinks naturally as battery range improves and charging behaviour shifts, while RUD provides the stable per-mile revenue floor throughout.
Steady-State Revenue: Full Fleet Electrification
At the point where the entire UK vehicle fleet has transitioned to non-fossil power — estimated mid-2040s under current trajectories — RUD replaces all fuel duty and VED revenue. The following table tests whether the rates generate sufficient revenue against 2035 projected vehicle miles, which serve as a reasonable proxy for steady-state volumes:
| Vehicle category | Fleet size | Avg miles/yr | Total miles (bn) | RUD rate | Revenue |
|---|---|---|---|---|---|
| Standard cars (≤2,000kg) | ~24.0m | ~7,250 | 174.0 | 7p | £12.18bn |
| Heavy cars (>2,000kg) | ~13.0m | ~7,150 | 93.0 | 14p | £13.02bn |
| Standard vans (≤2,000kg) | ~3.3m | ~10,900 | 36.0 | 7p | £2.52bn |
| Heavy vans (>2,000kg) | ~2.2m | ~13,600 | 30.0 | 14p | £4.20bn |
| HGVs (>3.5t GVW) | ~0.6m | ~26,500 | 15.9 | 20p | £3.18bn |
| Buses and coaches | ~0.15m | ~20,000 | 3.0 | 7p | £0.21bn |
| Motorcycles | ~1.5m | ~2,000 | 3.0 | 3p | £0.09bn |
| Total | ~44.8m | 354.9 | £35.40bn |
Against the current combined fuel duty + VED baseline of ~£33–35bn, RUD at these rates generates £35.40bn — revenue-neutral with a modest ~£1–2bn buffer against demand elasticity and behavioural adjustment. CPI indexation at 2% per year ensures that the rates hold their real value in perpetuity, eliminating the political freeze dynamic that has cost the Exchequer £120bn since 2011.
Revenue composition
The standard rate generates £14.91bn (42% of total) across cars, small vans, buses, and motorcycles. The heavy rate generates £17.22bn (49%) from large cars and large vans. The HGV rate generates £3.18bn (9%). The dominance of the heavy rate reflects the physical reality of the future fleet: by the mid-2030s, approximately 35% of car miles and 45% of van miles will be driven in vehicles above 2,000kg, and these vehicles drive more miles per year on average than their lighter counterparts.
The Self-Executing Transition
The architecture eliminates the need for a phased fuel duty reduction schedule. The transition is automatic:
When a vehicle switches from ICE to electric, it ceases to incur fuel duty (because it no longer buys fuel) and ceases to be liable for VED. It becomes liable for RUD instead. Revenue per vehicle is approximately maintained: a standard car that paid ~£690/year in fuel duty and £190/year in VED (£880 total) now pays ~£490–700/year in RUD depending on mileage. The slight per-vehicle reduction reflects the lower RUD rates relative to the combined FD+VED incidence — a deliberate incentive for electrification.
Aggregate revenue tracks the fleet composition. In any given year, total road taxation = (ICE fleet × fuel duty per mile × miles) + (ICE fleet × VED) + (electric fleet × RUD per mile × miles). As the ICE share shrinks and the electric share grows, fuel duty revenue falls and RUD revenue rises. The crossover is gradual and continuous.
Illustrative revenue trajectory
The following trajectory assumes the ZEV mandate drives BEV sales shares from ~23% (2025) to 80% (2030) to ~95%+ (2035), with fleet stock lagging sales by 5–8 years due to vehicle lifetimes:
| Year | BEV share of fleet | BEV share of miles | FD revenue | VED (ICE) | RUD revenue | Total |
|---|---|---|---|---|---|---|
| 2025 | ~6% | ~8% | £24.4bn | £8.4bn | — | £32.8bn |
| 2028 | ~12% | ~15% | £21.5bn | £8.0bn | £2.5bn | £32.0bn |
| 2030 | ~19% | ~23% | £19.0bn | £7.5bn | £6.8bn | £33.3bn |
| 2033 | ~30% | ~36% | £15.5bn | £6.5bn | £11.5bn | £33.5bn |
| 2035 | ~40% | ~47% | £12.5bn | £5.5bn | £15.5bn | £33.5bn |
| 2038 | ~55% | ~63% | £8.5bn | £4.0bn | £21.5bn | £34.0bn |
| 2040 | ~65% | ~73% | £6.0bn | £3.0bn | £25.5bn | £34.5bn |
| 2045 | ~85% | ~90% | £2.0bn | £1.5bn | £31.5bn | £35.0bn |
| 2050 | ~97% | ~98% | £0.3bn | £0.3bn | £34.8bn | £35.4bn |
Revenue is stable throughout. There is no fiscal cliff, no gap year, no legislative trigger required. The final £0.3bn of residual fuel duty can be left in statute until the last ICE vehicles are scrapped — or fuel duty can be formally repealed as a tidying exercise once revenues fall below a de minimis threshold.
The key advantage
This architecture makes the fuel duty problem disappear as a political issue. No Chancellor needs to "raise fuel duty" or "cut fuel duty." No Budget announcement is required. The transition happens vehicle by vehicle, household by household, as people buy their next car. The only legislative act is the introduction of RUD itself — a single new instrument with three rates and a weight threshold. Everything else is automatic.
What Drivers Pay: Worked Examples
Standard petrol car (Vauxhall Corsa, 1,250kg, 7,000 miles/year)
| Item | Under current system | After switching to electric Corsa |
|---|---|---|
| Fuel duty | ~£750 | £0 |
| VED | ~£190 | £0 |
| RUD (7,000 × 7p) | — | £490 |
| Total road tax | ~£940 | £490 |
Net saving on switch: £450/year. The lower road tax bill is part of the incentive structure for electrification.
Mid-size BEV (Tesla Model 3, 1,847kg, 10,000 miles/year)
| Item | Current (eVED regime) | Under RUD |
|---|---|---|
| VED | ~£195 | £0 |
| eVED (10,000 × 4p) | £400 | — |
| RUD (10,000 × 7p) | — | £700 |
| Total road tax | ~£595 | £700 |
Net change: +£105/year. A modest correction. The Tesla Model 3 falls under the 2,000kg threshold and pays the standard rate. The increase is marginal relative to the ~£800–1,200/year fuel cost saving of running an EV versus a petrol equivalent.
Large BEV (BMW iX, 2,500kg, 10,000 miles/year)
| Item | Current (eVED regime) | Under RUD |
|---|---|---|
| VED | ~£195 | £0 |
| eVED (10,000 × 4p) | £400 | — |
| RUD (10,000 × 14p) | — | £1,400 |
| Total road tax | ~£595 | £1,400 |
Net change: +£805/year. Concentrated on the premium segment. Still substantially below what an equivalent petrol BMW X5 pays: ~£1,400 in fuel duty + ~£340 VED = ~£1,740. The buyer of a £75,000+ vehicle can absorb a road tax bill that is still £340/year below its ICE equivalent.
ICE Range Rover (2,300kg, diesel, 10,000 miles/year)
| Item | Current system | Under RUD |
|---|---|---|
| Fuel duty | ~£1,400 | ~£1,400 |
| VED | ~£340 | ~£340 |
| RUD | — | — |
| Total road tax | ~£1,740 | ~£1,740 |
Zero change. ICE vehicles are entirely unaffected by RUD. No windfall, no penalty. Fuel duty and VED continue exactly as today.
Small electric van (Ford Transit Custom E, 1,900kg, 12,000 miles/year)
| Item | Current (eVED regime) | Under RUD |
|---|---|---|
| VED | ~£320 | £0 |
| eVED (assumed 4p) | £480 | — |
| RUD (12,000 × 7p) | — | £840 |
| Total road tax | ~£800 | £840 |
Net change: +£40/year. The Transit Custom falls under 2,000kg and pays the standard rate. Effectively neutral versus the eVED regime and substantially below the diesel equivalent (~£1,280 in FD+VED).
Large electric van (Mercedes eSprinter, 2,474kg, 15,000 miles/year)
| Item | Current (eVED regime) | Under RUD |
|---|---|---|
| VED | ~£320 | £0 |
| eVED (assumed 4p) | £600 | — |
| RUD (15,000 × 14p) | — | £2,100 |
| Total road tax | ~£920 | £2,100 |
Net change: +£1,180/year. The large van sector sees the most significant increase, reflecting the heavy rate on vehicles above 2,000kg. However, this is close to the diesel Sprinter's FD+VED burden (~£1,950 at 25mpg over 15,000 miles + £320 VED = ~£2,270), so it approximates what the operator would have paid on fossil fuel. The saving in fuel cost (electricity vs diesel) more than offsets the higher road tax.
Electric HGV (50,000 miles/year)
| Item | Diesel equivalent | Under RUD |
|---|---|---|
| Fuel duty | ~£9,500 | £0 |
| VED | ~£640 | £0 |
| RUD (50,000 × 20p) | — | £10,000 |
| Total road tax | ~£10,140 | £10,000 |
Net change: −£140/year. Revenue-neutral for haulage. The 20p rate is set below the fuel duty equivalent (~29p) to avoid a freight cost shock and reflect the nascent state of HGV electrification. The rate can be revisited once the electric HGV fleet reaches meaningful scale.
Collection Mechanism
RUD is collected through odometer-based annual assessment, building on the eVED infrastructure that becomes operational from April 2028:
MOT-registered vehicles (cars and vans over 3 years old, ~75% of the fleet): the odometer reading at annual MOT provides the billing basis. The MOT test already records mileage; RUD adds a financial consequence to that reading. DVLA issues an annual RUD assessment based on miles driven since last MOT and the vehicle's weight class. Payment by monthly Direct Debit instalments or annually.
New vehicles (under 3 years, exempt from MOT): self-reported annual mileage estimate with payment upfront or in instalments, reconciled at the first MOT when the actual odometer reading is available. Overpayment refunded; underpayment collected. This replicates the eVED mechanism already being developed for April 2028.
Commercial vehicles (vans and HGVs): tachograph and telematics data, already mandatory for HGVs, provides verified mileage. Vans report at MOT as per cars, with fleet operator accounts available for consolidated billing across multiple vehicles.
No GPS tracking. No telematics mandate for private vehicles. No real-time monitoring. The system piggybacks entirely on existing MOT, DVLA, and DVSA infrastructure. Privacy is preserved by design: DVLA knows total miles driven per year per vehicle, not where or when those miles were driven.
Kerb weight classification uses the manufacturer's declared kerb weight as recorded on the V5C registration document. The 2,000kg threshold is tested at the point of first registration and does not change over the vehicle's lifetime. There is no scope for gaming through aftermarket modification — removing a rear seat does not move a 2,100kg vehicle below the threshold.
Legislative Requirements
RUD requires a single Finance Bill provision:
- Establishment of Road Use Duty as a per-mile charge on non-fossil-fuelled vehicles.
- Three rate bands: ≤2,000kg kerb, >2,000kg kerb (≤3.5t GVW), and >3.5t GVW.
- Abolition of VED for vehicles liable for RUD.
- Annual CPI indexation of RUD rates, automatic unless Parliament votes to override.
- Repeal of the eVED provisions (which RUD supersedes).
- Power for DVLA to assess and collect RUD using MOT odometer data.
No amendment to fuel duty legislation is required. No amendment to VED legislation beyond exempting RUD-liable vehicles. No new institutional infrastructure — DVLA, DVSA, and the MOT network already exist and already record the necessary data.
The automatic CPI indexation clause is the single most important structural feature. It eliminates the political dynamic that has frozen fuel duty for 16 years: no Chancellor needs to announce a rate increase, because the increase happens by default. A Chancellor who wishes to freeze or cut RUD rates must actively legislate to do so — reversing the current incentive structure, where inaction means a real-terms cut.
Interaction with the Prosperity 2030 Programme
Road Use Duty is not a core component of the Prosperity 2030 legislative programme. It is included as a necessary companion measure — an awareness item demonstrating that the programme's fiscal architecture accounts for the major structural recalibrations that any credible government arriving in 2030 will need to address.
The interactions with the programme are:
Free bus travel. The Universal Transport Service abolishes bus fares and funds expanded bus services at £9.95bn/year. Electric buses become liable for RUD at the standard rate (7p/mile) on approximately 3.0bn annual bus miles = £0.21bn. This is lower than VED and Fuel Duty so will create headroom in that budget. The standard rate for buses (rather than the HGV rate that their weight would otherwise attract) is a deliberate policy choice to encourage electrification of the bus fleet. The existence of free buses also weakens the distributional objection to RUD: households for whom higher motoring costs are a concern have a zero-cost public transport alternative that does not exist today.
Energy transition. The programme's Energy for the Future and GB Energy Network accelerate the electrification of the vehicle fleet by reducing household electricity costs (abolished standing charges) and expanding charging infrastructure. Faster EV adoption accelerates the transition from fuel duty to RUD — but since RUD is revenue-neutral by design, faster transition does not create a fiscal gap; it simply shifts revenue from one instrument to the other more quickly.
Air Passenger Duty. The programme's APD increase (£8bn additional) sits alongside RUD as a transport externality correction. Both instruments share the same logic: users of carbon-intensive transport pay rates that reflect the social cost of their journeys, while users of cleaner alternatives face lower charges.
Cashflow model treatment. RUD does not appear as a revenue line in the Prosperity 2030 cashflow model. It is revenue-neutral against the existing fuel duty and VED baseline and generates no net additional fiscal space for the programme. It is included in the programme documentation solely to demonstrate that the fuel duty structural decline is addressed — ensuring that the programme's fiscal credibility is not undermined by an unacknowledged £10–20bn hole in the medium-term public finances.
Distributional Considerations
Income. Higher-income households own more cars, drive more miles, and own heavier vehicles. ONS data shows the top income quintile drives approximately 2.5× the miles of the bottom quintile. The weight threshold reinforces progressivity: vehicles above 2,000kg — Tesla Model S, BMW iX, Range Rover Electric, Mercedes EQS, Audi e-tron — are overwhelmingly concentrated in the upper income quintiles. Lower-income households who electrify will almost universally drive vehicles under 2,000kg and pay the standard 7p rate — a substantial saving against their current fuel duty bill.
Geography. Rural households drive more miles than urban households and would pay more RUD in absolute terms. This objection applies identically to fuel duty, which rural households already pay more of for the same reason. The standard RUD rate (7p/mile) is set below the average fuel duty incidence (~6.9p/mile for petrol at 35mpg) — so rural households switching to electric vehicles pay less in road tax than they did on fossil fuel. The programme's free bus service expansion, reaching rural areas for the first time, provides an additional mitigating alternative.
Vehicle age and affordability. Older vehicles are lighter — average kerb weight was 100–150kg lower a decade ago — and almost universally fall under the 2,000kg threshold. Households that cannot afford new vehicles will continue driving ICE cars and paying fuel duty + VED exactly as they do today until they are ready to switch. When they do switch — likely to a second-hand BEV in the sub-2,000kg segment — they move to the standard 7p rate and see a reduction in their total road tax bill. No household is worse off at the point of transition.
Electric vehicle incentive. The structure preserves a financial incentive for electrification. A standard car switching from petrol to electric sees its road tax fall from ~£940/year (FD+VED) to ~£490–700/year (RUD only, no VED). This £250–450/year saving, combined with lower fuel costs (£800–1,200/year), means the total cost of motoring falls significantly at the point of transition — reinforcing the policy objective of accelerating the shift away from fossil fuels.
Summary
| Element | Detail |
|---|---|
| Instrument | Road Use Duty — per-mile charge on non-fossil-fuelled vehicles |
| Rates (2025 £) | Standard (≤2,000kg): 7p; Heavy (>2,000kg, ≤3.5t): 14p; HGV (>3.5t): 20p; Motorcycle: 3p |
| Applies to | BEVs, hydrogen vehicles, any non-fossil-fuelled vehicle |
| Does not apply to | ICE vehicles (which continue paying fuel duty + VED as now) |
| VED | Abolished for RUD-liable vehicles; continues for ICE |
| Replaces | eVED |
| Steady-state revenue (full electrification) | ~£35.4bn |
| vs. current FD+VED | ~£33–35bn — revenue-neutral by design |
| Collection | Odometer-based annual assessment via MOT / self-report. No GPS. |
| Transition | Self-executing: each vehicle switching to electric drops out of FD+VED into RUD |
| CPI indexation | Annual, automatic — eliminates the political freeze problem |
| Buses | Charged at standard rate (7p) regardless of weight, to encourage electrification |
| P2030 interaction | Revenue-neutral; not claimed by programme; included as fiscal credibility measure |
All figures in 2025 prices unless stated. Vehicle miles from DfT Road Traffic Estimates 2024. Fleet projections based on ZEV mandate trajectory and SMMT registration data. Revenue estimates are illustrative and assume static behavioural response; actual revenues would be modified by demand elasticity (estimated at −0.1 to −0.3 for car miles with respect to per-mile cost) and vehicle weight substitution effects. Fuel duty incidence per mile calculated from HMRC duty rates and DfT average fuel consumption data.
Source: IGP Social Prosperity Network.