Resolution Foundation

Where the rubber hits the road

Reforming vehicle taxes
Net Zero

The transition to net zero means that the way we drive is changing, bringing with it the prospect of sharp falls in motoring-related tax revenues. For decades, taxing driving has contributed significantly to tax revenues, but the cheaper motoring that electric-vehicle (EV) drivers enjoy – driven in large part by exemptions to taxes paid by drivers of petrol and diesel vehicles – will see these receipts dwindle. This risks an annual £10 billion black hole in the early 2030s and reaching more than £30 billion per year within the next three decades. So, in this briefing note we discuss how the rapid and welcome uptake of electric vehicles must come with reform of motoring related taxes that protects tax revenues, helps limit congestion, and considers the potentially disproportionate impacts on low-to-middle income households. We have outlined a package of measures that ensure EV drivers start to pay their way but also supports a rapid transition away from petrol and diesel vehicles while not putting the burden on those who cannot afford to switch cars. 


For all research queries about this report, please contact Jonathan Marshall. For press queries, please contact the Resolution Foundation press office.

Jonathan Marshall
Senior Economist,
Resolution Foundation
Email Jonathan