Rachel Reeves’s proposed pay-per-mile car taxes for electric vehicles could lead to higher insurance premiums for millions of drivers.
Experts have warned that the Chancellor’s new car tax scheme for electric vehicles could lead to increased premiums and mid-policy adjustments for motorists across the UK.
The planned levy, which would see EV drivers charged 3p for each mile driven, in addition to existing road taxes, has prompted concerns from motor industry specialists about wider implications for all drivers.
Graham Conway, managing director at Select Car Leasing, warned that enhanced Government oversight of annual mileages could prompt insurance providers to examine odometer readings more closely.
“The Chancellor’s pay-per-mile plan is likely to put estimated annual mileages for drivers in the spotlight,” Mr Conway stated, adding that this increased scrutiny “should set alarm bells ringing for all motorists, no matter what sort of car they drive”.
The tax measure, which is expected to be announced at the Autumn Budget, would require electric vehicle owners to pay annual bills calculated according to their recorded travel distances, marking a significant shift in road taxation policy.
Insurance providers currently request estimated yearly mileages when calculating premiums, with these figures directly affecting policy costs.
Mr Conway highlighted that insurers possess multiple methods to verify actual distances travelled, including access to MOT test data and shared vehicle servicing records.
Drivers have been warned of the impact the car tax changes at the Autumn Budget can have on insurance prices
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GETTY/PA“If you attempt to cheat the system by underestimating your annual mileage in order to lower the cost of your policy, you could end up having your policy voided for ‘misrepresentation’, particularly if you were to attempt to make a claim,” he cautioned.
Such policy invalidation could leave drivers personally responsible for repair expenses, injury compensation and third-party damage costs.
Drivers who provide inaccurate mileage estimates might face accusations of insurance fraud under the Consumer Insurance Act 2012, potentially making future coverage significantly more expensive.
Minor discrepancies between estimated and actual mileages are usually resolved through premium adjustments at renewal time.
However, substantial inaccuracies could lead to claim rejections and policy cancellations. Mr Conway emphasised that mileage represents a crucial risk indicator from an insurance perspective.
The proposed taxation system could also lead to more stringent verification processes affecting all motorists, not exclusively electric vehicle owners.
“We could see more regular odometer checks, mid-term premium hikes, charges for exceeding estimates, and increasing use of black boxes,” Mr Conway explained.
Some insurers already employ telematics devices or connected car technology to monitor mileage automatically, particularly for younger drivers or pay-per-mile policies.
Drivers could see their car insurance spike due to pay-per-mile changes
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GETTYMr Conway told drivers to examine previous MOT certificates to determine their genuine annual mileage patterns and suggested rounding figures upward rather than downward to provide an adequate margin.
“When estimating your annual mileage, try and base it on real data,” he recommended, warning that the monetisation of driver mileages through the proposed EV taxation could lead to more thorough inspections by insurers.
The heightened focus on mileage accuracy extends beyond electric vehicle owners, with all motorists potentially facing stricter verification procedures.
“Be honest with your annual mileage calculation or prepare to face the consequences,” Mr Conway concluded.
