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Last week, Tom McLennan, Catherine Bowen and Zohra Chagani from the BVRLA’s Policy Team spent four days in Reykjavík, researching first-hand the live experiences of Iceland’s equivalent of e-VED.
The valuable trip was full of interesting insights of how Iceland’s pay-per-KM charge has worked in the first two years. The team crammed in ten meetings during the visit and heard from rental companies, the Icelandic Government officials responsible for road taxes, the EV drivers’ association and various trade bodies.
Iceland’s road user charge has been in place since the start of 2024 and is like the UK’s proposed e-VED in many ways: the Icelandic charge currently applies to EVs and plug-in-hybrids, just like the UK proposal. While the team was there, however, a Finance Bill was passed, extending the pay-per-KM charge to all cars, not just electric and hybrid.
There are, however, some other fundamental differences: the estimated mileage is calculated by the Icelandic Government based on drivers inputting their mileage reading through an app, as well as during car services or on vehicle sales. It can be updated as frequently as every thirty days. In the proposed UK system, the individual driver would need to estimate the average mileage for the whole year and pay the charge in advance, together with the annual road tax.
In Iceland, there have been a lot of teething issues with an inability to correct mistakes if a mileage reading has been input incorrectly. This has led to frustration and in some cases, several months of back and forth between drivers and Government authorities. The team heard time and again that the system has been designed for individuals not fleets. There was also advice for the UK Government that a minimum of four years is needed to create the right systems for the right type of road pricing.
The team heard strong evidence of the negative impact on EV uptake. At one point, Iceland was second in the world, (behind Norway) in EV adoption. It had an impressive 50% of all new sales being electric. In 2024, this dropped down to approximately 26% and although, this has improved in 2025, Iceland now sits much lower down in the EV adoption league table than before pay-per-KM. This should be a cautionary tale: for a country like Iceland where electricity is far more abundantly available than in the UK, making the switch to EVs far easier, even there the introduction of pay-per-KM has set the transition back. In the UK, it is not the time to be introducing additional complexities or costs to a driver considering an EV.
If you agree, do take time to complete the Write to your MP action, telling your local MP why e-VED is the wrong tax at the wrong time.
Also read through the information on the Transport Select Committee’s Inquiry: Super Charging the EV Transition. Which provides an opportunity for members to submit insights on e-VED, the used EV market and other related topics. The deadline for submitting evidence is 30 January.
In the meantime, the Policy Team will continue to reflect on the learnings discovered in Iceland, the contacts made and use the findings to help with work coming up next year.
