Motorists across the UK, particularly those with electric or plug-in hybrid vehicles, are being alerted to a significant new financial burden set to hit their driveways and charging routines. The government has confirmed the introduction of a new pay-per-mile taxation system, which will see running costs surge by hundreds of pounds for many drivers.
What is the new pay-per-mile tax?
In a major overhaul of motoring tax laws, Chancellor Rachel Reeves has unveiled the new system, which will directly charge drivers based on the distance they travel. This marks a fundamental shift from the current vehicle excise duty (VED) model.
The new rates have been set at 3p per mile for fully electric vehicle (EV) owners and 1.5p per mile for plug-in hybrid drivers. The policy is scheduled to come into effect in April 2028, giving motorists a little over two years to prepare for the change.
How much will drivers actually pay?
The financial impact will vary dramatically depending on individual mileage. Using the national average of 8,500 miles driven per year, an EV owner would face an annual charge of £255. A hybrid driver covering the same distance would pay £127.50.
However, those with longer commutes or who live in rural areas and are therefore more car-dependent will be hit hardest. The charges are not capped, meaning costs will scale directly with mileage. A driver covering 15,000 miles annually in an EV would see a yearly bill of £450.
The Treasury estimates the new scheme will raise approximately £1.4 billion in revenue.
Industry reaction and long-term implications
Motoring experts have warned that the new tax could act as a deterrent for Britons considering the switch to electric transport. Jonathan Such, a motoring expert at First Response Finance, commented on the announcement.
"The Government has announced the introduction of a pay-per-mile charge of around 3p per mile for EV drivers to start in April 2028 to raise £1.4bn," said Such. "This will impact the number of Brits moving to electric vehicles as any perceived increased cost could be viewed as a barrier. Part of the appeal of an EV, alongside the environmental benefits, are the economic factors."
He advised drivers to use the time before implementation to prepare and to check government websites for potential grants related to home charging points. He also highlighted that "with the additional pay per mile, the cost for longer journeys could quickly add up."
The move represents a significant policy shift, as electric vehicles have previously enjoyed tax advantages to encourage their adoption. The new system aims to ensure all road users contribute to maintaining the UK's transport infrastructure as the Treasury faces a declining income from fuel duty.
