New distance-based taxation system charges EV drivers 3p per mile from 2028
Chancellor Rachel Reeves has confirmed a new distance-based road tax system for electric and plug-in hybrid vehicles, launching in April 2028 as part of the government’s strategy to replace declining fuel duty revenues.
The scheme will charge battery EV drivers 3p per mile, while plug-in hybrid owners will pay 1.5p per mile. These rates will rise annually with the Consumer Price Index and apply on top of the existing £195 annual Vehicle Excise Duty. The Office for Budget Responsibility projects the levy will generate approximately £1.4 billion yearly by 2029-30.
Drivers covering 8,500 miles annually will face an additional £255 charge in the first implementation year. However, OBR analysis indicates the policy may significantly impact EV uptake, forecasting 440,000 fewer EVs on British roads by 2031. This decline could challenge manufacturers working to meet Zero Emission Vehicle mandate requirements.
Industry response has focused on implementation timing during a critical transition period. “We recognize that reforming how the UK funds its roads is necessary in the long term, and that pay-per-mile charging will eventually form part of that solution,” says Delvin Lane, CEO of InstaVolt. “However, introducing such a system at this stage risks putting off drivers who are considering making the switch to electric by layering on new costs.”
Lane highlighted concerns about differential impacts: “The Government must also consider the disproportionate impacts that such a scheme will have on drivers without home charging, who are already paying 20% VAT on public charging vs 5% at home, and on rural/low-income commuters.”
Tanya Sinclair, CEO of Electric Vehicles UK, acknowledged reform necessity: “The UK’s motoring tax system needs fundamental, long-term reform. Change is inevitable as more drivers switch to electric, and no government enjoys having to wholesale reform car taxation.”
To mitigate the new taxation, the government will raise the Expensive Car Supplement threshold for EVs from £40,000 to £50,000 starting April 2026, alongside expanded Electric Car Grant funding. Implementation details will follow a public consultation period.
