Rachel Reeves Confirms New Pay-Per-Mile Tax for Electric Vehicle Drivers
Chancellor Rachel Reeves has officially announced the introduction of a new pay-per-mile tax system specifically targeting owners of electric vehicles and plug-in hybrids. The tax, which will be known as electric vehicle excise duty (eVED), is scheduled to come into effect from April 2028.
How the New Tax Will Work
The new pay-per-mile tax will charge electric vehicle owners at a rate of 3p for every mile driven. Plug-in hybrid vehicle owners will face a lower rate of 1.5p per mile. This means that drivers covering 5,000 miles annually will pay £150, while those driving the UK average of 8,000 miles per year will face charges of £255.
The government has stated that this new tax is designed to address fuel duty losses that have accumulated as more motorists transition to electric vehicles in recent years. Treasury minister Dan Tomlinson explained that drivers will pay for their mileage alongside their existing vehicle excise duty (VED).
Impact on Electric Vehicle Owners
This announcement represents another financial burden for electric vehicle owners, who were required to pay vehicle tax for the first time just last year. Previously, electric vehicle drivers were exempt from this charge, making this the second significant tax change affecting EV owners in a short period.
According to government consultation documents, the tax rates have been set at half of the equivalent fuel duty rate for electric cars, and half again for plug-in hybrid vehicles. Ministers argue that this approach will ensure all car drivers contribute to road maintenance while maintaining incentives for drivers to switch to electric vehicles.
Government Rationale and Response
The government maintains that this overhaul will create a fairer system where everyone contributes to road infrastructure. A consultation document states: "eVED will ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle."
With the average UK driver covering approximately 8,000 miles annually, the financial impact will be significant for many electric vehicle owners. The tax is part of broader government efforts to address the revenue gap created by declining fuel duty collections as the nation transitions toward electric transportation.
