In a recent announcement by the Chancellor during the Budget session, owners of electric vehicles (EVs) and certain hybrid cars are set to encounter a new tax framework that will significantly impact their financial expenses. Starting from April 2028, drivers of electric vehicles will be subject to a road charge of three pence per mile, while those with plug-in hybrids will incur a fee of one and a half pence per mile. This new taxation mechanism is designed to gradually increase in alignment with inflation each year, ultimately positioning it as a more sustained form of revenue compared to traditional fuel duties.
According to the Office for Budget Responsibility (OBR), this per-mile charge will amount to approximately half of the current fuel duty imposed on petrol car users. The Chancellor also announced a commitment to extend the existing five-pence cut in fuel duty until September next year, emphasizing the government’s ongoing efforts to manage fuel affordability amidst rising global prices.
The implementation of this pay-per-mile framework will involve tracking the mileage of drivers annually. This monitoring can be conducted during routine maintenance checks, such as the MOT for existing vehicles, or during the early registration anniversaries of new cars. Payment for the tax will be integrated into the Vehicle Excise Duty system, which is overseen by the DVLA. It is estimated that an electric vehicle driver who travels 8,500 miles in the 2028-29 fiscal year will be required to pay around £255—a payment which the Chancellor claims is about half of what petrol and diesel drivers currently pay for fuel tax.
However, there are concerns regarding the accuracy and potential tampering of mileage records, as vehicle odometers can be easily manipulated. The government is cognizant of this risk and is actively consulting on measures to minimize occurrences of odometer tampering, also referred to as “clocking.”
Despite the anticipated tax benefits for the government, which are projected to bring in an estimated £1.1 billion during the 2028-29 fiscal year, the yield remains uncertain and heavily reliant on future EV adoption rates. The new tax will apply to vehicles registered in the UK, but those registered abroad—even if driven within the UK—will be exempt from the charges.
The forthcoming change in taxation coincides with a significant legislative shift scheduled for 2030, which mandates that all new cars sold must be either electric or hybrid, effectively phasing out petrol and diesel vehicles. Industry insiders express concerns that this new charge might dissuade consumers from purchasing electric cars. The OBR has even predicted an estimated decline of around 440,000 EV sales, potential offsets considered.
In addition to the new pay-per-mile tax, the Vehicle Excise Duty will see a hike for luxury electric vehicles from £425 to £440 per year starting in April 2026. This increase applies to vehicles priced above £50,000, marking a substantial shift in the tax structure aimed at high-end electric vehicle owners.
The perception of this new tax is mixed. While some consumers, like Stephen Walton from Crewe, have voiced frustrations over what they see as penalties for choosing environmentally-friendly vehicles, industry representatives from companies such as Ford and the Society of Motor Manufacturers and Traders (SMMT) have criticized the government’s approach as ill-timed. They argue that the added financial burden could hinder the progress toward achieving increased electric vehicle uptake.
Furthermore, voices from the Renewable Energy Association suggest that a comprehensive review of vehicle taxation should encompass all vehicle types, with environmental impact reflecting the respective costs. There is a growing call for the government to collaborate with both the automotive and charging sectors to establish a fair and sustainable tax model that still motivates consumers to transition toward zero-emission vehicles.
Ultimately, the Budget has initiated a complex dialogue surrounding the future of electric vehicle ownership in the UK. Drivers and industry stakeholders alike are grappling with the implications of these new tax policies as they navigate the balancing act between fiscal responsibility and promoting greener vehicle options.
