Chancellor Rachel Reeves has confirmed a new pay-per-mile tax that will hit owners of electric vehicles (EVs) and plug-in hybrids with significant additional costs. Under the new system, EV drivers will be charged 3p per mile, while plug-in hybrid owners will pay 1.5p per mile. For the average UK motorist driving 8,000 miles annually, this translates to a £240 bill on top of standard vehicle tax.
Higher Costs for High-Mileage Drivers
Many motorists who travel further than the national average will face substantially higher charges. This includes individuals who use their cars for work, long commutes, or reside in rural areas with limited public transport options. The tax is designed to address falling tax revenues as more drivers transition to electric vehicles, which currently pay no fuel duty.
Implementation Timeline and Government Rationale
The new tax is scheduled to take effect from April 2028. The government argues that petrol and diesel drivers already pay per mile through fuel duty, making this a move towards equalising taxation across vehicle types. However, critics warn it could deter Britons from switching to electric cars.
Industry Concerns
Simon England, founder of ALA Insurance, expressed concerns: “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 Motorists
The announcement comes as part of broader tax reforms before Reeves leaves her role as Chancellor. The pay-per-mile system will apply to both fully electric vehicles and plug-in hybrids, potentially affecting hundreds of thousands of drivers. With average annual mileage in the UK around 8,000 miles, the £240 charge represents a significant new expense for EV owners, who previously benefited from lower running costs.
