Chancellor Rachel Reeves has officially confirmed the introduction of a new pay-per-mile tax system for electric vehicles (EVs) and plug-in hybrids in the UK, with some drivers facing annual charges of up to £300. This significant policy shift targets EV owners as the government seeks to address declining fuel duty revenues amid the growing transition to electric mobility.
Details of the New Pay-Per-Mile Charge
The Treasury has outlined that EV owners will be charged at a rate of 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. This means that motorists covering 10,000 miles annually in an electric car will incur an additional £300 in running costs. The charge is set to come into effect from April 2028 and will operate alongside the existing Vehicle Excise Duty (VED).
Government Rationale and Implementation
In a statement, Treasury minister Dan Tomlinson explained that the new Electric Vehicle Excise Duty (eVED) was announced at the Autumn Budget 2025. He emphasised that this move ensures all car drivers contribute to road funding, particularly as fuel duty revenues fall due to the increasing adoption of electric vehicles. The government asserts that eVED will maintain incentives for switching to electric while avoiding the need for intrusive tracking devices or a complex new tax system.
This development follows last year's introduction of vehicle tax for EV drivers, marking a continued shift in how electric vehicle ownership is taxed in the UK. The consultation document for eVED states that rates are set at half the equivalent fuel duty for electric cars and half again for plug-in hybrids, aiming to balance revenue generation with environmental goals.
Political and Public Response
The announcement has sparked debate, with concerns raised about the financial impact on high-mileage drivers and the broader implications for the EV market. Independent MP James McMurdock questioned Chancellor Reeves on potential changes to vehicle tax structure, to which Mr Tomlinson confirmed there are no current plans for alterations beyond the new mileage charge.
As the UK progresses towards its net-zero targets, this policy highlights the evolving landscape of motoring taxation and the government's efforts to adapt fiscal measures to changing vehicle technologies.
