Electric vehicle drivers to be charged new per mile tax from 2028

Taxation on electric vehicles will be brought closer in line with petrol and diesel cars, as drivers will be forced to pay 3p per mile driven under a new levy.

Drivers of electric vehicles (EVs) will become subject to a new tax for every mile they drive, chancellor Rachel Reeves has confirmed in her Autumn Budget.

Taking effect in April 2028, EV drivers will have to pay a new levy of up to 3p per mile, as the chancellor brings the taxation of EVs closer in line with that of petrol and diesel cars.

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Fully electric battery vehicles will be subject to the full 3p per mile tax, while plug-in hybrid vehicles will have to pay a reduced rate of 1.5p per mile. These rates will increase each year in line with inflation, as measured by the consumer prices index (CPI).

The new levy was designed to provide a rough equivalent to fuel duty, which is paid by drivers of petrol and diesel vehicles on each litre of fuel. The 3p per mile charge is around half the equivalent cost of fuel duty per mile.

The average driver of a fully electric car, travelling 8,500 miles a year, can expect to be charged around £255 in the 2026/27 tax year under the new regime.

The government is in the process of consulting on the policy, but anticipates that mileage will be self-reported, possibly during an annual MOT, with “no requirement to report where and when miles are driven or install trackers in cars".

The Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, says the measure will raise around £1.1 billion in the 2028-29 tax year, rising to £1.9 billion in 2030-31.

However, the OBR has also warned that the new measure is “likely to reduce demand for electric cars as it increases their lifetime cost,” expecting 440,000 fewer electric car sales by 2030/31.

Meanwhile, to soften the blow, the chancellor also announced that the UK’s new electric vehicle grant, worth between £3,500 and £7,500 depending on the model, will be extended until at least 2030.

And, despite rumours she would axe the scheme, electric cars can still be bought using salary sacrifice.

New pay-per-mile tax on EVs is a “confused” policy

EV policies announced in the Budget have received a mixed reception from industry leaders.

Melanie Lane, chief executive of EV charging provider Pod, said the decisions “have further complicated the outlook for motorists and manufacturers that are looking for clarity on their commitments to the EV sector”.

She welcomed the extension of the Electric Car Grant, but warned that introducing the new pay-per-mile levy “is at odds” with the Government’s messaging about “backing the switch”.

“This confused policy approach will shake consumer confidence and potentially jeopardise investment in the sector at a critical moment,” she added.

“We are already falling behind on the ZEV mandate that expects one in three cars sold to be zero-emissions next year and today’s confirmation of additional mileage costs from 2028 will penalise motorists and manufacturers who are fulfilling their end of the bargain.”

Meanwhile, Steve Walker, head of digital content at Auto Express, said the introduction of the new tax was inevitable considering the number of UK drivers who are moving away from petrol and diesel vehicles.

He said: “Petrol cars will be on the road for many years to come, but every EV sold is one fewer that’s visiting petrol stations and pumping money into Treasury coffers.”

Walker acknowledged that the new levy will “prove controversial”, especially since the government had sought to incentivise the purchase of more EVs when they introduced the new grant earlier this year.

“A major issue now will not only be a reduction in sales – even the OBR is suggesting it could reduce the number of EVs sold before 2030 by hundreds of thousands – but how the system is implemented.

“Early suggestions that drivers might need to declare mileage ahead of time raise genuine concerns; if motorists end up being charged for miles clocked outside the UK, that would clearly be unfair and a major flaw that must be addressed before any scheme goes live.

“Getting these details right will be critical to public acceptance.”