Outgoing Chancellor Rachel Reeves has confirmed details of a new pay-per-mile tax targeting owners of electric vehicles (EVs) and plug-in hybrids, set to take effect in April 2028. The levy will be charged alongside existing vehicle tax and is designed to compensate for falling fuel duty revenue as more drivers switch to electric cars.
Tax Rates and Impact on Drivers
Under the confirmed plans, EV owners will pay 3p per mile driven, while plug-in hybrid owners will be charged at a lower rate of 1.5p per mile. Based on the UK average annual mileage of approximately 8,000 miles, EV drivers would face an additional £240 bill each year. However, many motorists travel significantly more, particularly those in rural areas or with long commutes, resulting in higher costs.
Government Rationale and Concerns
The government argues that the tax is necessary as fuel duty revenue declines with the growing adoption of EVs. Currently, petrol and diesel drivers effectively pay per mile through fuel duty. Critics warn the new levy could discourage drivers from switching to electric vehicles, undermining environmental goals. The policy applies to all EVs and plug-in hybrids, with no exemptions for work-related travel or rural drivers.
Timeline and Implementation
The tax will not be enforced until April 2028, giving motorists and the automotive industry time to prepare. Reeves confirmed the details shortly before stepping down as Chancellor, following Prime Minister Keir Starmer's departure from Downing Street. The announcement has sparked debate over the fairness and timing of the measure, especially for households already facing cost-of-living pressures.
