The UK government has confirmed a significant shift in how electric vehicle (EV) owners will be taxed, with annual MOT tests set to become the checkpoint for a new pay-per-mile levy. Announced in the Autumn Budget 2025, the new system aims to ensure drivers of cleaner cars contribute to road upkeep as fuel duty revenues decline.
How the New eVED System Will Work
The Labour Party government is introducing a new charge called eVED (electric Vehicle Excise Duty) for battery-electric and plug-in hybrid cars. This tax will be paid annually on top of the standard VED and will come into effect in April 2028.
Unlike previous proposals involving tracking devices, the government has opted for a simpler method to protect privacy. Mileage will be recorded during a vehicle's yearly MOT test. Drivers will then estimate and pay for their anticipated mileage for the coming year upfront, alongside their existing tax payment.
The government stated this model "minimises reporting requirements for taxpayers, whilst respecting motorists’ privacy" and confirmed there is no requirement to report where or when miles are driven.
Why the New Tax is Being Introduced
The primary driver for the reform is a looming shortfall in Treasury revenue. As the nation transitions to electric vehicles, income from traditional fuel duty is projected to plummet.
Fuel duty receipts are forecast to fall by around half to approximately £12 billion by the 2030s. The government highlighted that this lost revenue is equivalent to funding 265 million GP appointments, or nearly 70% of the appointments that took place in England last year.
The new eVED is designed to ensure these funds do not dry up, preventing the need for spending cuts or tax increases elsewhere. The policy aims to create a "fair transition" where all road users contribute to the wear and tear they cause.
Rates and Impact on Drivers
To maintain the incentive for drivers to choose electric, the government has set the new rates below those for petrol and diesel vehicles. The rate of eVED paid by pure electric vehicle drivers will be half the fuel duty rate paid by the average petrol or diesel driver. Plug-in hybrid drivers will benefit from a further reduced rate.
Ministers emphasised their commitment to supporting both consumers and the automotive industry, stating: "The government is firmly committed to ensuring that driving an electric vehicle is an attractive choice... This is key to supporting UK automotive manufacturers and to meeting our net zero goals."
The new system represents a fundamental change in road taxation, moving the burden gradually from the pump to the mile for the growing number of electric car owners on Britain's roads.
