Chancellor Unveils New Pay-Per-Mile Tax System for Electric and Hybrid Vehicles
Chancellor Rachel Reeves has confirmed the introduction of a new motoring tax that will specifically target drivers of electric vehicles (EVs) and plug-in hybrids based on the distance they travel annually. The new charge, set to come into effect from April 2028, will require drivers to pay alongside their existing Vehicle Excise Duty (VED).
Tax Rates and Thresholds for High-Mileage Drivers
Under the newly announced rates, drivers of specific vehicle models will face a charge of £210 for covering 7,000 miles in a single year. The tax structure implements a pay-per-mile system, with EV drivers being charged at a rate of 3p per mile, while plug-in hybrid owners will pay 1.5p per mile.
This means that an electric vehicle driver traveling 10,000 miles annually would incur a total charge of £300 under the new system. Costs will increase proportionally for those who travel beyond these distances, creating a sliding scale of taxation based directly on road usage.
Government Rationale and Industry Response
The Treasury has explained that the new Electric Vehicle Excise Duty (eVED) is being introduced in response to declining fuel duty revenues as more British drivers transition to electric vehicles each year. Treasury minister Dan Tomlinson stated: "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."
According to government consultation documents, the tax "will be set at half of the equivalent rate of fuel duty for electric cars, and half again for plug-in hybrid cars." Officials emphasize that the system "will ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle."
Implementation Details and Privacy Concerns
The government has clarified several key implementation details regarding the new tax system:
- No tracking devices will be required in vehicles
- Drivers will not need to interact with a completely new tax system
- Payments will be made alongside existing road tax (VED) obligations
- The system applies specifically to electric vehicles and plug-in hybrids
Despite government assurances about maintaining incentives for electric vehicle adoption, concerns have been raised that the new tax could potentially discourage some drivers from making the switch to cleaner transportation options. The government maintains that the revised system will create a fairer contribution framework as the automotive landscape continues to evolve toward electrification.
