A new pay-per-mile road tax for EVs and plug-in hybrids (PHEVs) is set to come into force in April 2028.
Details of the new tax were released ahead of the Chancellor Rachel Reeves announcing her Autumn budget on 26 November 2025. The pay-per-mile tax could cost drivers of electric vehicles who cover 10,000 miles per year around £300 per year at a rate of 3p per mile. This will come on top of the £195 road tax (formally known as Vehicle Excise Duty or VED) that was first levied on EVs in April 2025. Under the plans, drivers of plug-in hybrid cars will also pay 1.5p per mile, adding £150 to their annual tax bill if covering the same distance of 10,000 miles per year.
The tax is designed to help plug the gap in the Treasury’s finances left by the drop in fuel duty as more drivers switch to EVs from petrol and diesel cars.
The government’s position is that, as well as the lost revenue from fuel duty, there is an issue of ‘fairness’: drivers of petrol and diesel cars already pay on average £600 per year in VED as well as fuel duty of around 53p per litre every time they fill up.
The Office for Budget Responsibility also says that the new tax will be approximately equivalent to "half the fuel duty rate paid by drivers of petrol cars".
Also potentially offsetting the price hike for many will be the fact that the threshold for the government's Expensive Car Supplement (often known as the luxury car tax) is to be raised from £40,000 to £50,000 for electric cars only, meaning many more models will no longer attract the £425 annual supplementary tax from years 2-5 following the car's first registration.
Pay-Per-Mile EV Tax: Everything you Need to Know
- When will the pay-per-mile EV tax come into force?
- Fuel duty versus pay-as-you-go EV tax
- Will the new EV tax make them more expensive to run than petrol cars?
- Filling the gap of fuel duty: why a pay-per-mile EV tax might be necessary - How the new EV mileage tax will work
- Pay-per-mile tax could go beyond EVs
When will the pay-per-mile EV tax come into force?
The new system, dubbed VED-plus, will not come into force until April 2028, following a consultation period, and follows a recommendation by the independent think tank The Resolution Foundation.
In its ‘Call of Duties’ report, the think tank recommended that the current fuel duty system should be completely replaced with a charge that takes into account mileage driven, plus weight – especially for some heavier electric cars – as this takes into account extra factors such damage to roads, increased physical size, tyre and brake pollution and often the value of the vehicle itself.
The idea of pay-per-mile taxes (sometimes also known as road charging) goes back quite a bit, however: the Labour Transport Secretary Alistair Darling was considering a National Road Pricing Scheme as far back as 2006.
This met with significant opposition, however, and was dropped after an online petition to scrap the plans garnered more than 1.8 million signatures.
Fuel duty versus pay-as-you-go EV tax
In some ways, fuel duty is similar to a pay-per-mile tax, in as much as the duty you pay on fuel is connected to the distance you travel. However, the amount you pay to cover a given distance will depend on how much petrol or diesel your car uses. This won’t be the case for EVs and the pay-per-mile tax, as it won’t take into account the vehicle’s energy efficiency.
Will the new EV tax make them more expensive to run than petrol cars?
The new tax will cost EV drivers more than they pay now, but the VED on EVs is still significantly lower than for many petrol or diesel cars, and if you charge at home for the majority of your mileage, then even adding 3p per mile will still mean your average EV is significantly cheaper to run than the average petrol car.
For example, at the time of writing, the average petrol car costs approximately 17p per mile in fuel, while if you have an electric car that can achieve 3.5 miles per kilowatt hour of energy, it can cost as little as 2p per mile if you charge on an EV-specific home tariff. That means even with pay-per-mile tax added, it will only cost you 5 pence per mile – less than a third of the average petrol-powered car.
If you don't have a home charger, or you make regular use of public charging infrastructure, the situation is a little less positive. The cost at a rapid public charger is normally around 80p per kilowatt hour, so if you solely used these, your cost per mile with the same 3.5 miles per kilowatt hour is just under 24p per mile, so 27p per mile with the new EV duty. That would make it equivalent, roughly speaking, to running a 35mpg petrol car in per-mile cost terms.
Filling the gap of fuel duty: why a pay-per-mile EV tax might be necessary
According to the Society of Motor Manufacturers and Traders (SMMT), there are almost 1.5 million EVs on UK roads today, and this could be as many as 6 million vehicles by the time the new regulations come into force.
Introducing a replacement for fuel duty on these vehicles will help make up for the slowly reducing number of combustion-engined cars on UK roads.
It’s predicted that this could raise as much as £1.9 billion in tax revenues per year by 2031, but some commentators have expressed concerns that the policy may slow EV adoption at a crucial time, with the phase-out of sales of new combustion-engined cars planned for 2035.
The timing is certainly awkward, coming so soon after the government has pledged £650 million to deliver grants of up to £3750 for those purchasing a new electric car.
However, the government has announced that it will boost the funding for this grant by £300 million, meaning that the programme will continue until 2030.
How the new EV mileage tax will work
The plan appears to be that the tax will be based on a driver’s estimates of their road usage for the year ahead, and the cost can be returned to them in the form of a credit if they overestimate the mileage, or a top-up charge will need to be paid by those underestimating their annual mileage.
This avoids the complexity and cost of a tracked system such as the original road pricing plan from 2006 – those original plans were much more complex than the current proposals, however, and involved GPS receivers and different charges at different times.
That being said, questions remain over how the new system will be audited or implemented.
Pay-per-mile tax goes beyond EVs
A per-mile tax is also set to affect drivers of plug-in hybrids, at a rate of 1.5p per mile. Looking forward, it’s also feasible that the Treasury may seek to introduce a similar system for regular hybrid and/or combustion-engined cars.