The UK Government has confirmed an electric vehicle tax that will take effect from April 2028 in a major shift to affect millions of motorists. Moreover, the vehicle tax electric cars plans to introduce a 3p per mile tax for electric vehicles and a 1.5p per mile tax for plug-in hybrids. Hence, it will mark the first time EVs will pay a usage-based road tax.
The UK Chancellor in the latest Budget made the announcement for the introduction of the EV Tax. In addition, it aims to recover the declining fuel duty revenue as the country is moving to zero-emission motoring. Stay tuned with me to know everything about the EV pay per mile tax.
What Is the New Electric Vehicle Tax?
As we mentioned above, the government has introduced the new mileage tax for electric vehicles from April 2028, which will also be known as mileage-based Electric Vehicle Excise Duty (eVED). Under the new system, you can expect the following changes:
- Electric cars will pay 3p per mile
- Plug-in hybrids will pay 1.5p per mile
- Rates will increase annually in line with inflation
- Payments will be integrated into the existing Vehicle Excise Duty system
This new tax per mile electric cars system is intended to replace the lost road tax revenue. According to the Office for Budget Responsibility (OBR), the new car tax is about half the fuel duty rate currently paid by petrol drivers. Moreover, the OBR estimates that an average EV-owner driving 8,500 miles in 2028–29 will pay around £255.
How Will the Pay-Per-Mile System Work?
The mileage tax on electric cars is usage-based. Hence, it means that drivers will be taxed as per the number of miles they drive. Take a look at the key components of this Electric Car Tax system below:
Annual Mileage Checks
Mileage will be verified during the MOT tests. Moreover, new EVs ( which do not need MOT for 3 years) are required to visit a test centre yearly for a government-funded mileage check.
Self-Reporting System
You will estimate your mileage and pay upfront or through instalments. Please note that you will be responsible for the difference if your actual cost exceeds the estimate. However, the amount will carry over as credit if you overpay.
The government acknowledge risks of odometer tampering. Hence, they are finding ways to reduce fraud, including the potential use of connected vehicle data.
Industry Reaction: “Wrong Measure at the Wrong Time”
This pay-per-mile tax has attracted strong criticism across the automotive sector. Below are the reactions of the top organisation on this electric car mileage tax:
- Ford called the tax “a confusing message” that could slow EV adoption.
- The Society of Motor Manufacturers and Traders (SMMT) warned it would “undermine demand”.
- The Renewable Energy Association labelled it a “knee-jerk reaction”.
- Charging companies argued it disproportionately impacts rural and low-income drivers.
The OBR has predicted that the UK Electric Car Tax could reduce the EV sales by up to 440,000 over the next 5 years. However, the treasury argues that the figure is closer to 120,000 by expecting incentives like grants to offset some decline.
Drivers Feel “Penalised” by the New EV Tax
Many EV owners say to the BBC that the EV car tax makes electric car ownership less financially attractive.
Stephen Walton from Crewe, who bought an EV to do the right thing, said to the BBC,” The Electric Car Tax is the final straw. I have paid more to help the environment. Now, I am being penalised for it”.
Fuel Duty and Road Tax: What Else Changes?
- The 5p fuel duty cut is extended until September next year, after which duty will rise annually.
- The luxury EV car tax will rise to £440 per year for vehicles priced above £50,000.
- A new Fuel Finder tool launching in 2026 will help motorists compare petrol prices nationwide.
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