Chancellor Rachel Reeves has confirmed a new tax that will hit certain drivers, with owners of some models facing hundreds of pounds in charges. The pay-per-mile tax will charge motorists based on how far they travel, with rates set at 3p per mile for electric vehicles (EVs) and 1.5p per mile for plug-in hybrids.
This means drivers of electric cars covering 10,000 miles a year will have to pay £300 at the 3p rate. While the UK average annual mileage is around 8,500, millions of motorists travel much further and will face significantly higher costs. Commuters and those living in rural areas are expected to be hit hardest.
Details of the New Tax
The pay-per-mile tax is scheduled to come into force from April 2028. Critics fear it could discourage people from switching to electric vehicles, especially after EV drivers were forced to pay vehicle tax for the first time last year. Ministers argue that petrol and diesel drivers already pay based on how far they travel through fuel duty.
Industry Reaction
Simon England, founder of ALA Insurance, commented: "Drivers are being encouraged to switch to electric cars ahead of the 2030 ban on ICE vehicles but financial incentives are quickly disappearing. If EV drivers are expected to pay the same, or more, than petrol and diesel drivers, then that's a legitimate barrier that will deter thousands of road users from switching. The rise in EV adoption will leave quite a gap in the Government's revenue from road tax, but raising taxes for electric cars is definitely off-putting to people considering a switch, especially when they won't have a choice from 2030, as it stands."
The new tax comes as part of the government's broader budget measures, with Reeves delivering her Budget alongside Labour Party leader and Prime Minister Sir Keir Starmer. The announcement follows earlier confirmation of a £170 charge for cars made before 2017.
