The Department for Transport has given an update on the new pay-per-mile system which is set to hit motorists. Last month, Chancellor Rachel Reeves said she was aiming to impose the charges, which could see electric vehicle (EV) drivers paying an extra £267 per year based on current national mileage averages.
The system which will also target hybrid cars is set to come into action in April 2028, and has caused concerns in the motor industry that it will put people off buying EVs. In a new interview this morning Secretary of State for Transport Heidi Alexander doubled down on the new charge.
Speaking on BBC Breakfast she said: “We think that everyone who uses our roads needs to contribute to the maintenance of our roads. We have ageing motorways, we need to make sure that we’re repairing them. We’ve announced record investment. Um, in highways maintenance so that we can fix potholes and we are going to be in the place by the end of this parliament in about 4 years’ time where we have doubled the amount of money that we are spending on local roads maintenance.
“That money has to come from somewhere, and we think it’s right that people who are driving electric vehicles on our roads contribute in the same way as people who are driving petrol and diesel vehicles. So we need to get the balance right. But we also need to be fair to everyone.”
Under the current proposal, EV drivers would pay 3p per mile, while plug-in hybrid (PHEV) owners would pay 1.5p per mile. It remains unclear how mileage will be monitored for newer vehicles in practice before they have MOTs.
GAP insurance provider ALA Insurance said that using Department for Transport mileage data and UK vehicle registration figures, it estimates the government could generate £466,449,000 annually from battery-electric vehicles alone.
Viewers weren’t impressed. On X John said: “Electric car drivers already pay road tax to use our roads, and pay for the electricity used to charge them. Cheaper running costs was the incentive to move away from petrol and diesel.”
Paul added: “Well done @UKLabour for shooting yourselves in the (Green) foot (and EV drivers in the pocket) with this new tax! As an early adopter of EV as well as solar, I’m now wondering why I bothered, given all the extra costs – from Road Tax to ECS and now this! Time to go back to petrol Lou said: “You don’t have to be a genius to work out once revenue from petrol/diesel vehicles dropped they’d come after the EV drivers. I’ll stick with petrol.”
The UK government’s planned pay-per-mile tax, set to be introduced in 2028 as part of the Autumn Budget, could see electric vehicle (EV) drivers paying an extra £267 per year based on current national mileage averages, according to new analysis from GAP insurance provider ALA Insurance. Plug in hybrids would probably pay £120 extra.
Under the current proposal, EV drivers would pay 3p per mile, while plug-in hybrid (PHEV) owners would pay 1.5p per mile. It remains unclear how mileage will be monitored for newer vehicles in practice before they have MOTs.
Simon England, founder of ALA Insurance and GAP Insurance expert, said the introduction of a pay-per-mile model reflects a substantial shift in how the government intends to recoup declining fuel-duty revenue as EV adoption rises.
“Fuel duty and road tax have long provided a reliable income stream, but the recent rise in electric vehicle adoption has created a gap in government revenue,” England explained.
“A gradual levy introduced earlier in the EV transition may have been easier for motorists to accept. Even a small tax on public EV charging could have helped balance revenue without penalising early adopters.”
Mr England warned that the new tax risks discouraging drivers from going electric ahead of the 2030 ban on new petrol and diesel cars. “Further incentivising electric cars would have been far more beneficial, allowing consumers to switch before being forced to,” he said. “Trade-in support or stronger part-exchange offers would help accelerate adoption without disproportionately impacting drivers unable to switch immediately.”
Fuel duty will also be increased. The Treasury said the 5p per litre cut in duty introduced by the Conservative government in March 2022 would only be extended until the end of August 2026.
Rates will then gradually return to March 2022 levels by March 2027.
The Treasury said in April 2028, an average EV driver will pay about £240 per year.
A Treasury consultation document revealed that for eVED, drivers of electric cars will be required to estimate their mileage for the year and either pay upfront or spread their payment across the year. This will happen when they pay VED.
Drivers will submit their actual mileage at the end of the year, and either make an extra payment or receive a credit for future use as required. Motorists will have their mileage checked annually.
This will be during their MOT for most cars. But as new cars do not have an MOT until they are three years old, they will be checked at about the first and second year anniversary of their registration.
The document stated that the Government has ruled out charging tax based on when or where people drive to “protect motorists’ privacy”.
This means mileage driven overseas by UK-registered cars will fall into the scope of eVED. Steve Gooding, director of motoring research charity the RAC Foundation, said it was “inevitable” that the Treasury would “backfill its coffers” as it watches income from fuel duty “ebbing away”.
The OBR warned that the new tax will reduce sales of electric cars by about 440,000 as it is “likely to reduce demand … as it increases their lifetime cost”.
Ginny Buckley, the chief executive of EV advice website Electrifying.com, described the Government’s approach to the EV transition as “muddled and confusing”, by offering purchase grants but “piling new taxes” on those who have already switched from petrol or diesel models.
