What's the fairest car tax option

One in five drivers say current UK car tax system is unfair

A recent Tempcover survey of over 2,000 UK drivers explored what motorists think of the current tax system, and what they believe is the fairest way to charge drivers. In addition to 22% of UK drivers believing the current car tax system is unfair, the survey revealed:

• 29% believed that car tax based on mileage driven would be fairest.
• 18% believed that car tax based on emissions (e.g. CO2 output) would be fairest.
• 14% believed that a flat fee for everyone, regardless of vehicle or use would be fairest.

This research shows there is an appetite amongst drivers for moving towards usage-based payments and only paying for what they need, although 13% of those surveyed did say there’s no fair way to charge vehicle tax.

It appears that the Government may be thinking along the same lines. BBC news is reporting EV drivers could face new tax charges in the next Budget, many drivers are questioning what the fairest option is when it comes to paying Vehicle Excise Duty (VED).

Auto Express reports that the scheme could come into place in 2028 and that electric vehicles will be charged 3p per mile on top of the regular tax charges. The rate will be charged based on how far drivers drive their cars, but details of how are yet to be revealed. They state this could cost EV drivers:

• £2 for a one-way journey between London and Oxford.
• £13 for a return trip from London to Manchester.

The Telegraph reports that this scheme could cost EV drivers up to £250 on an annual basis.

Our temporary car insurance expert Claire Wills-Mckissick said: "Our research suggests that there is a strong driver preference for paying for vehicle tax based on how much you use your car. Temporary car insurance works on the same principle, you only pay for the hours or days you actually drive. It’s a flexible way to stay covered, and it taps into the growing appetite among motorists for pay-as-you-go solutions, whether for tax or insurance.”

What is road tax and how does it work?

The RAC describes Vehicle Excise Duty (road tax) as ‘essentially a tax for using a vehicle on public roads in the UK’. It’s normally a standard annual fee, with the amount you pay based on when a vehicle was registered, what type of fuel it uses and its emissions. All cars registered on or after 1 April 2017 have to pay a flat fee.

Road tax rates are automatically adjusted in line with inflation on an annual basis, with changes confirmed in the government’s annual Budget.

• Most drivers will pay a standard rate of £195 per year, but this will vary depending on CO2 emissions in its first year and will be significantly higher if the vehicle costs more than £40,000 during its first six years.
• Electric vehicle owners now have to pay the standard rate of £195 per year if the vehicle was registered between 1 April 2017 and 31 March 2025 (£10 for the first year for EVs registered after 1 April 2025, rising to £195 thereafter).

Is road tax going up in 2026?

Until the details of the Budget are announced by the chancellor Rachel Reeves on Wednesday 26 November, it cannot be confirmed if road tax will increase.

Press reports deem a rise to be likely, especially for electric vehicles, which could open up debate about the ‘fairest’ option of paying once more.

• In our poll, 75% of those who favoured a mileage-based system believe drivers who cover more miles should pay more each year.

While fairness can be subjective, we asked the respondents how their preferred tax models should be applied. The results showed that many believe those who drive more should pay more tax.

• 87% of respondents who favour emissions-based tax believe higher emissions should equal higher tax.
• 45% of those who think tax should be based on vehicle age say owners of newer vehicles should pay more, while 34% think owners of older cars should.[1]
• 43% of those who support tax rates based on vehicle type believe diesel vehicle owners should pay the most.
• 19% of those who support a tax system based on vehicle type thought electric vehicle drivers should pay more than petrol car drivers.

This reflects the trend of the general public believing drivers should pay more for tax based on impact. Of course, the more you drive, the more emissions you may generate. This means engine size could play a part if this kind of flexible tax was to come in.

This flexible option could suit more occasional drivers as there’s potential to only pay for the miles driven. However, this could end up with more frequent drivers paying the bulk of the taxes that go into the Exchequer.

Could flexible car tax work like temporary car insurance?

To see how pay-per-usage tax could work, drivers could consider the benefits of temporary car insurance - a flexible system where you only pay for the time you need. This is beneficial to occasional drivers, people taking test drives or anyone borrowing another vehicle to move furniture.

A similar kind of system could potentially be used for tax purposes, especially for those who own a car but don’t drive it every day.

Our survey suggests a number of drivers want to pay tax only when they’re using a vehicle. They can already do this with temporary car insurance. Will vehicle excise duty follow this route?

Sources

This online survey of 2,000 UK drivers was commissioned by RVU on behalf of Tempcover and conducted by market research company OnePoll, in accordance with the Market Research Society's code of conduct. Data was collected between 12th and 16th September 2025. All participants are double-opted in to take part in research and are paid an amount depending on the length and complexity of the survey. This survey was overseen and edited by the OnePoll research team. OnePoll are MRS Company Partners, corporate membership of ESOMAR and Members of the British Polling Council. Unless otherwise specified, all insights are drawn directly from this survey’s results.

[1]Remaining percentages refer to respondents who selected ‘not sure’ answer options.