Prosperity 2030 UCL · IGP Prosperity 2030

Road Use Duty

Plugging the fossil gap

Structural Measure · business, economics, transport
Cost per mile
7p
Cars, taxis, buses, light vans
Cost per mile
14p
Heavy cars & vans
Net Revenue
0% GDP
Motoring revenues stabilised

As the UK transitions away from liquid fossil fuels towards electric transport, there is a significant budget gap from falling Fuel Duty. A credible policy framework must address this in the period over which the Prosperity 2030 programme is imagined.

This is not a significant component of the Prosperity 2030 programme itself, but rather is included here in recognition of the need to interleave other fiscal recalibrations that are necessary to maintain credibility in the round.

Road Use Duty (RUD) can be phased in to replace completely the existing mix of duties.

The following charges (in 2025 £s) per mile by vehicle type would generate the equivalent revenues:

  • Cars, taxis, buses, vans: 7p per mile
  • Cars and vans exceeding 2,000 kg weight: 14p per mile
  • Motorcycles: 3p per mile
  • Lorries: 20p per mile

Fossil fuelled vehicles remain on the current system, which costs more than RUD, through the end of their lives. All new vehicles pay RUD.

Detail

The UK plans for Fuel Duty replacement, extended to 2030, suggest that the combination of taxes and duties will generate revenues of £34.6 billion a year.

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

[2030 combined estimate]

After 2030 (on current policy) 10–15% of the fleet will go to battery electric vehicles (BEV) every five years, and fuel duty drops toward £12–15 billion while electric Vehicle Excise Duty (eVED) would need to scale to £6-8 billion to keep pace.

The RUD Appendix contains details of an example transition that is revenue neutral and replaces Vehicle Excise Duty (VED) and Fuel Duty for electric vehicles. The worked examples show that every EV driver still pays less in total road tax than an equivalent internal combustion engine (ICE) driver.

Related & Appendices1 link across 1 group
Appendices
Appendix

Road Use Duty: Framework and Transition

Published 18 May 2026 · Updated 18 June 2026