You’re absolutely right that the UK will eventually need to address the loss of tax revenue from petrol and diesel vehicles as more drivers make the switch to EVs.

One possibility is road pricing per mile, where drivers are charged based on how much they drive rather than a flat annual tax. This system could replace fuel duties, which will diminish as more combustion engine vehicles are phased out. Though the technology for road pricing exists, implementing such a system could be politically sensitive, as it might be perceived as another form of surveillance. Having said that, it would be a fairer system on road wear and tear.

The government could introduce targeted taxes on EV-related activities. For example, they could impose taxes on charging infrastructure, EV battery replacement or the electricity used for charging, especially at public charging points. This would directly link the tax burden to EV usage and could be scaled as adoption increases. Probably wouldn’t work for home charging.

A broader approach might involve increasing carbon taxes, which could apply to various sectors, including transportation. This would encourage cleaner energy use while generating revenue to replace the lost fuel duties.

It's a great question, @jeff, and one I have considered quite a lot over the years; just not specifically in relation to EVs.

Whilst vehicle excise duty is a levy for driving on or parking on public roads, it does not really contribute to the upkeep of said roads. Ultimately, their maintenance is generally a local council responsibility whilst the excise duty is paid directly to central government. As such, it actually gets used to fund pretty much the same things that are funded by income tax, VAT, inheritance tax, capital gains tax and any other centrally collected taxation. Since there is no specific link between the levy for using the roads and the maintenance of those roads, I can't see any compelling reason for keeping the vehicle excise duty at all.

In fact, there is a very good reason for scrapping it in order to remove an unfair practice. When one buys a new car, the dealership is required legally to ensure the vehicle is road legal (except for specific exceptions such as if it's being exported), and that includes purchasing vehicle excise duty. The whole bundle is then itemised on an invoice and VAT added, meaning the customer is being charged a tax on a tax.

Obviously, however, the Government will be losing tax revenue as numbers of ICE vehicles drop and if they don't have the tax they can't provide the services the revenue pays for. In my opinion the most obvious would simply be to absorb the duty into another existing tax or range of taxes; a simple adjustment of VAT would work. There is no reason, though, why any updated version of the duty or any replacement to it should in any way be linked with road usage, vehicle ownership or transport of any kind.

All that said, @editor has rightly pointed out that charging technology is capable of being much smarter now and that some form of toll could be introduced that raised funds to be centrally collected and then paid directly onward to the local authorities responsible for the specific roads involved in a given journey. That way some form of link between actual road usage and actual road maintenance could be introduced which I personally see as perfectly fair.

Here are the government published tax receipts for context.

Labour have said they won't increase the main rate of vat, national insurance and income tax.

Everyone should be tax on how much they use the roads, bigger heavier vehicles pay more than a super mini per mile.

Ditch road tax, but keep fuel duty as it is. If you choose to keep ICE then your choice to Kay extra duty.

You check mileage at MOT time, vehicles that are under 3 years old, have a mandatory mileage check and all vehicles are taxed in arrears based on vehicle weight and miles covered.

A new vehicle at first registration pays a fee, based on a average miles for that vehicle weight bracket.

A follow up question.

What do you think about adjustments of some kind, for example the poorest in society.

Should any complexities be added or keep it simple?

Another question...

If kept, should fuel duty or road pricing be aligned with the actual spend on roads or should it also cover other things like subsidising public transport likes buses and trains, or perhaps no link at all with transport?

Posted by: @jeff

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Another question...

If kept, should fuel duty or road pricing be aligned with the actual spend on roads or should it also cover other things like subsidising public transport likes buses and trains, or perhaps no link at all with transport?

It's just a tax, it gets spent as required from the tax pot, so no point.

The OBR says scrapping fuel duty would need an average of £850 per household in tax, not taking into account VAT.

Increases in the standard rate of VAT, income tax and national insurance have been ruled out.

So if scrapped.

Should every household be asked for this? Or should it be based on household wealth/income like CGT, dividend tax, IHT increases from the more wealthy?

Would scrapping fuel duty increase car usage?

Posted by: @jeff

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A follow up question.

What do you think about adjustments of some kind, for example the poorest in society.

Should any complexities be added or keep it simple?

I think it's only appropriate that, as a society, we should help those who need it most. However, it's far easier to put in place understandable rules for that purpose if the whole thing is simpler to start with. Simply ditching vehicle excise duty in total and incorporating it into other taxes is a significant simplification already and so will help. Given income tax is already calculated based on someone's earnings, it would not be difficult to introduce an adjustment there instead; perhaps an increase on the untaxed threshold to help with travel to/from work if a person's earnings fall under a certain limit or some similar mechanism. I hasten to add these are just ideas off the cuff and I'm certainly no expert on the intricacies nor have I thought through how it would affect people with various difficult situations (carers, disabilities, unemployed etc.), so they're only supposed to be discussion starters, not solutions.

Nonetheless, my preference would be to greatly simplify the taxation process first and then introduce complexities to assist the disadvantaged once the foundations are much more understandable and solid.

Of course, this opens up a whole VERY big rabbit hole of its own, and that is the process of taxation as a whole. One only needs to look at the sheer number of accountants, financial advisers and tax specialists (often very well remunerated) to question why we have a system of tax that is so complex that supporting that workforce to navigate still ends up saving investors money. It's a hugely wasteful and unnecessary process. We even have the statement given by the HMRC itself saying it is the third largest Government department employing over 67,500 people, and that's all to ensure everyone is paying enough tax; remember, all 67,500 staff are paid from the revenue they collect, so that's one hell of an overhead - around £3.3 billion in fact.

It makes sense to me that a far simplified taxation system would require far fewer people to police and run it, and far fewer private sector specialists to help navigate how to make someone's individual tax bill more "efficient". Of course, I also realise that if we tore down the whole edifice and made it as simple as it could be we'd be instantly making thousands of financial people redundant. That's one of the reasons I'm well aware I don't have all the answers and therefore have never stood for election claiming I do.

Posted by: @jeff

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The OBR says scrapping fuel duty would need an average of £850 per household in tax, not taking into account VAT.

Increases in the standard rate of VAT, income tax and national insurance have been ruled out.

So if scrapped.

Should every household be asked for this? Or should it be based on household wealth/income like CGT, dividend tax, IHT increases from the more wealthy?

Would scrapping fuel duty increase car usage? 

It's not so long ago that personal car ownership was seen as a luxury. These days, even multiple car ownership can sometimes be justified as essential. Personally, I feel there are elements of both and that the essential portion should be unencumbered whilst the luxury portion should be fairly heavily taxed. After all, we all have to get to work, do the shopping, get to/from hospitals and the like but a trip to the seaside is not essential. Given all that, I would answer that yes every household should be required to contribute but only after essentials have been taken into account. If a household can only afford the essentials then their contribution should effectively be zero. If a household can afford more than the essentials then their contribution should be proportionately greater.

Posted by: @jeff

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Another question...

If kept, should fuel duty or road pricing be aligned with the actual spend on roads or should it also cover other things like subsidising public transport likes buses and trains, or perhaps no link at all with transport?

As I said before, I see no point in maintaining a fictional link between vehicle excise duty or its replacement with transport. The money doesn't get used to maintain what it's taxing, so what's the rationale?

That aside, as for public transport I'm not a fan of subsidies in their current form. Where public transport has a sufficient number of customers (e.g. London), using public transport makes sense for the average member of the public and so doesn't need a subsidy in the first place. Elsewhere, particularly in rural communities, the subsidies still don't afford the public a comprehensive enough service to make the widespread use of public transport viable to a lot of people. In many cases you still need to use a car to get to the nearest station or bus stop to use the public transport in the first place.

I remember a situation about 10 years ago when my wife worked in London and we lived in the Green Belt. At that point, if my wife played fast and loose with her work's finishing time and left a few minutes before she should she could just about catch a train home at the start of the rush hour. That train would pull into the nearest station to us about 5 minutes after the last bus servicing our village had left the bus station. In short, physically impossible to commute via public transport alone. Subsidies certainly make it easier for local bus companies to stay in business but if the service isn't fit for purpose you'll never get a critical mass of users to make it all viable.