What we know (and don’t know)
The Autumn Budget confirmed a major change for electric vehicle (EV) owners: from April 2028, a new pay-per-mile tax will apply to EVs and plug-in hybrids. This measure is designed to replace some of the revenue lost from fuel duty as more drivers switch to zero-emission vehicles.
To be clear, electric vehicles will still work out cheaper to run than petrol and diesel cars. With overnight cheap electricity rates, EVs can cost as little as 2p per mile for “fuel”, compared to around 20p per mile for many petrol and diesel cars.
Furthermore, EVs will still be an attractive tax opportunity for company owners (limited by shares or limited by guarantee and social enterprises) who can claim tax relief for the cost of an EV in their company and enjoy low benefit in kind tax on the personal use of the car.
What’s changing from April 2028?
- Electric cars will pay 3p per mile.
- Plug-in hybrids will pay 1.5p per mile.
- This is in addition to Vehicle Excise Duty (VED), which EVs have been liable for since April 2025.
- The average EV driver covering 8,500 miles per year will pay around £255 annually under the new scheme.
How will mileage be recorded?
This is where things get interesting – and uncertain. The government has ruled out real-time tracking or in-car devices, citing privacy concerns. Instead, drivers will:
- Estimate their annual mileage when paying VED and either pay upfront or spread payments.
- Mileage will then be verified annually, usually at MOT tests.
But here’s the catch: new cars don’t need an MOT for the first three years. So how will mileage be checked for those vehicles? The Treasury says there will be “light-touch mileage checks” at accredited garages on the first and second anniversaries of registration – at no cost to motorists. However, details remain vague, and the Chancellor admitted that the government still needs time to “get this right.”
Our view
While it’s understandable that the Treasury needs to replace falling fuel duty revenues, the lack of clarity on implementation could create confusion and extra burden for drivers.
What makes this policy particularly puzzling is the contradiction at its heart. In the Budget speech, the Chancellor reaffirmed the government’s commitment to encouraging the uptake of electric vehicles as part of the UK’s net-zero strategy. Yet, this new mileage charge effectively penalises EV owners, sending a mixed message and undermining green objectives. If the aim was revenue, a simpler and greener approach would have been to increase VED on internal combustion engine (ICE) vehicles, maintaining the incentive for drivers to switch to EVs. Instead, this measure risks slowing the transition to cleaner transport – a very ungreen policy at a time when climate targets demand urgency.