Owners of certain cars will soon be hit by a new pay-per-mile tax, potentially costing hundreds of pounds extra each year depending on the vehicle they drive. The tax applies to electric vehicles (EVs) and plug-in hybrids, with rates set at 3p per mile for EVs and 1.5p per mile for plug-in hybrids, on top of standard vehicle tax.
Details of the New Tax
Announced by former Chancellor Rachel Reeves and continuing under new Prime Minister Andy Burnham, the pay-per-mile tax is designed to address falling tax revenue as more drivers switch to electric. For a driver covering 10,000 miles annually in an EV, the additional cost would be £300 per year. The UK average mileage is around 8,000 miles, but millions travel further, especially those who use cars for work or live in rural areas with limited public transport.
Implementation Timeline
The new rules are due to come into force from April 2028. Concerns have been raised that the tax could deter Britons from switching to electric vehicles ahead of the 2030 ban on new petrol and diesel cars.
Industry Reaction
Simon England, founder of ALA Insurance, commented: “Drivers are being encouraged to switch to electric cars ahead of the 2030 ban on ICE vehicles but financial incentives are quickly disappearing. If EV drivers are expected to pay the same, or more, than petrol and diesel drivers, then that’s a legitimate barrier that will deter thousands of road users from switching.”
Impact on Drivers
The pay-per-mile tax will particularly affect those with high annual mileage, such as commuters or rural residents. With the UK average mileage at 8,000, a typical EV driver would pay an extra £240 per year, while those driving 10,000 miles would face £300 in additional charges. The tax is part of a broader shift in vehicle taxation as the government seeks to maintain revenue from road users in the transition to electric mobility.
