Quick Read
- UK government proposes a pay-per-mile tax for electric and hybrid vehicles, starting in 2028.
- The tax aims to address the loss of fuel duty revenue as more drivers switch to EVs.
- EV drivers would estimate annual mileage and pay in advance; hybrids pay a lower rate.
- Industry groups and opposition politicians warn the move could deter EV adoption.
- Consultation and further details are expected before implementation.
Why Is the UK Considering a Pay-Per-Mile Tax for Electric Cars?
As the UK accelerates its shift toward electric vehicles (EVs), a new challenge has emerged for the Treasury: how to replace the billions lost in fuel duty as petrol and diesel cars fade from British roads. Reports from The Telegraph and corroborated by BBC News suggest that Chancellor Rachel Reeves is preparing to unveil a pay-per-mile tax for EVs in the upcoming Budget, with the levy expected to come into force in 2028 after a public consultation.
This tax, starting at approximately 3p per mile, is intended to create a ‘fairer system’ for all drivers. Currently, petrol and diesel vehicle owners pay an average of £600 a year in fuel duty. Electric car drivers, by contrast, pay nothing toward this tax, despite still using public roads and infrastructure. The Treasury argues that as EVs become more common, their exemption from fuel duty creates a growing fiscal gap.
How Will the Pay-Per-Mile Scheme Work?
Under the proposed system, the pay-per-mile charge would be integrated with the annual Vehicle Excise Duty (VED) process. Since April 2025, EVs are no longer exempt from VED, but the new scheme—internally dubbed ‘VED+’—would add another layer: drivers would estimate their mileage for the year ahead and pay the corresponding charge in advance. If their actual mileage is less, the balance rolls over; if more, they top up at year’s end.
Hybrid cars would be taxed at a lower rate, reflecting their partial reliance on petrol. Notably, the government has emphasized that this will not require intrusive tracking or real-time monitoring. Instead, mileage could be verified through odometer readings or photographic evidence, managed by the Driver and Vehicle Licensing Agency (DVLA).
Based on current average EV mileage (8,900 miles per year), the tax would cost electric car owners around £279 annually. For comparison, a trip from London to Edinburgh would add roughly £12 to the cost for EV drivers.
Industry and Political Reactions: Support, Skepticism, and Critique
The announcement has sparked immediate and heated debate. Industry leaders, environmental groups, and political opponents have voiced concerns about the timing and impact of the tax.
The Society of Motor Manufacturers and Traders (SMMT) called the proposal ‘the wrong measure at the wrong time.’ SMMT warns that introducing a complex, costly regime targeting EVs—vehicles manufacturers are already struggling to sell—risks undermining the UK’s ability to meet its Zero Emission Vehicle (ZEV) mandate and could deter consumers from making the switch.
Vicky Edmonds, CEO of EVA England, echoed these concerns: ‘Our survey data shows that at least half of drivers are still finding the upfront purchase costs of these vehicles to be too high, and that half of EV drivers without driveways are finding their vehicles more expensive to run than their former petrol and diesel cars.’
Edmund King, president of the AA, advised caution: ‘The Government has to tread carefully unless their actions slow down the transition to EVs. We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or a poll tax on wheels.’
From the political sphere, opposition voices are equally vocal. Shadow chancellor Mel Stride criticized the move, arguing that it unfairly targets commuters and car owners during a cost-of-living crisis. Liberal Democrat Treasury spokesperson Daisy Cooper added, ‘It beggars belief that in the midst of a cost-of-living crisis and in the face of air pollution and rising respiratory diseases, the government is looking to hit people with an electric car tax.’
The Road Ahead: Balancing Revenue, Net Zero, and EV Adoption
The government’s rationale for the tax is rooted in numbers. Fuel duty currently raises about £25bn a year, but projections suggest as much as £12bn could be lost annually by 2040 as petrol and diesel sales decline. By 2028, up to six million EVs are expected to be on UK roads, with the levy forecasted to raise about £1.8bn by 2031.
Officials stress that the pay-per-mile plan is about fairness and maintaining public infrastructure funding. They insist it will be part of a broader package to support EV adoption, including existing grants of up to £3,750 per eligible vehicle and £4bn in support for charging infrastructure. Yet, industry analysts warn that much depends on implementation. If drivers perceive the tax as a punitive extra cost rather than a fair replacement for fuel duty, it could slow the transition to electric cars just as momentum is building.
James Court, Head of Policy at Octopus Electric Vehicles, offered a measured perspective: ‘EV drivers should pay – but it should come at the right level and the right time. Now would be far too soon – EVs represent only 4% of cars on our roads and a tax would raise a minimal amount until this number is bigger.’
Tom Middleditch, sustainability spokesperson at Europcar, was blunt: ‘We have a deep concern that a tax on mileage of electric vehicles will create doubt in people’s minds and be another deterrent to adoption of zero tailpipe emissions motoring right now.’
What’s Next? Consultation, Implementation, and Unanswered Questions
The government plans to consult widely before rolling out the pay-per-mile tax in 2028. Key details—such as how mileage will be verified, how the scheme will interact with existing taxes, and what support will be available for lower-income drivers—remain to be finalized.
There’s also the question of public trust. Industry experts urge the government to communicate transparently and design the system in partnership with stakeholders. Tanya Sinclair, CEO of Electric Vehicles UK, summed up the sentiment: ‘Government must take the time to consult properly, design carefully and communicate transparently, a process that will take years, not months.’
Meanwhile, the debate highlights the tension at the heart of the UK’s net zero ambitions: how to sustain public finances while encouraging the shift to cleaner transport. Successive governments have incentivized EV adoption with grants and lower running costs. Now, as those incentives start to fade, policymakers face the delicate task of balancing fiscal needs with environmental goals.
As the UK prepares to consult on a pay-per-mile tax for electric vehicles, the outcome will hinge not just on the numbers, but on whether the public and industry see it as a fair evolution—or a step backwards. The challenge will be to design a system that secures vital funding for infrastructure without stalling the shift to cleaner transport at a crucial moment for climate and the economy.