Rachel Reeves Announces New Pay-Per-Mile Tax for Electric Vehicles
Chancellor of the Exchequer Rachel Reeves has officially confirmed the introduction of a new mileage-based tax specifically targeting owners of electric vehicles (EVs) and plug-in hybrids. This significant policy shift, set to take effect in April 2028, will require drivers to pay an additional charge based on the distance they travel each year, on top of existing vehicle excise duty (VED).
How the New Tax System Will Work
The new electric vehicle excise duty (eVED) will apply a per-mile rate to certain models, with charges set at either 3p or 1.5p per mile depending on vehicle specifications. For an average driver covering 10,000 miles annually, this translates to an extra £300 per year in additional costs. Those who rely on their vehicles for longer distances will face substantially higher payments, potentially reaching hundreds of pounds annually.
Treasury minister Dan Tomlinson provided clarification on the policy's implementation: "At Autumn Budget 2025, the Government announced the introduction of electric vehicle excise duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028. Drivers will pay for their mileage alongside their existing vehicle excise duty (VED)."
Impact on Electric Vehicle Adoption
Industry experts have expressed concerns that this new tax could significantly impact EV sales and adoption rates. Simon England, founder of ALA Insurance, warned: "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."
England further explained the government's revenue dilemma: "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."
Government Rationale and Industry Response
The government maintains that this new system will create a fairer taxation model, noting that petrol and diesel vehicle owners already pay based on distance traveled through existing fuel duty costs. However, this announcement represents another indication that ministers are increasingly targeting electric vehicle owners for tax revenue, following last year's introduction of VED payments for EVs for the first time.
Motorists planning to switch to electric vehicles in the coming years will need to carefully consider these additional costs when making their purchasing decisions. The new tax structure adds another financial consideration to the already complex calculation of total cost of ownership for electric vehicles.
