Rachel Reeves has confirmed a new motoring tax that will charge certain drivers based on the distance they travel each year. The pay-per-mile tax will apply to owners of electric vehicles and plug-in hybrids, while petrol and diesel drivers remain unaffected.
How the Tax Works
From April 2028, EV owners will be charged 3p per mile, and hybrid owners 1.5p per mile. Payments will be collected alongside existing vehicle excise duty. The average UK driver covers around 8,000 miles annually, resulting in an extra £240 per year for EV owners at the 3p rate. However, those with longer commutes or who rely on their cars for work could face significantly higher costs.
Government Rationale
Ministers argue the tax creates a fairer system, as EV drivers currently avoid fuel duty when charging at home. With rising EV adoption, fuel duty revenues have declined, prompting this new levy. Petrol and diesel drivers already pay per mile through fuel duty at the pumps.
Impact on EV Adoption
Motoring experts warn the tax could deter drivers from switching to electric vehicles. Simon England, founder of ALA Insurance, said: “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.”
This is the latest cost targeting EV owners after they were forced to pay vehicle duty for the first time last year. The tax is set to be controversial among households it impacts, particularly those in rural areas with limited public transport or long commutes.
