Electric vehicle (EV) and plug-in hybrid owners will be charged a new pay-per-mile tax from April 2028, with the confirmed rates set to add hundreds of pounds to annual motoring bills for many drivers.
The policy, announced originally by Rachel Reeves during her time as Chancellor, will be implemented under her successor, John Healey. It applies only to cars that use electricity for propulsion – pure EVs and plug-in hybrids – and will be levied on top of the existing annual vehicle tax.
Confirmed rates for EVs and plug-in hybrids
Full electric cars will be taxed at 3p per mile, according to the confirmed schedule. Plug-in hybrids, which also have a petrol or diesel engine, will be charged a lower rate of 1.5p per mile. In both cases, the charge is additional to the standard road tax that all drivers must pay.
For a motorist covering the average 8,000 miles a year, the pure EV charge works out to £240 extra each year. That figure has been used in government examples, but it will rise for anyone who drives more than that. The average does not tell the whole story – millions of UK drivers travel far further annually, meaning their additional costs could be significantly higher.
How the charge compares with existing motoring taxes
Petrol and diesel drivers are already subject to a usage-based tax through fuel duty. Every time they fill up, a portion of the price goes to the Treasury. That means the more they drive, the more fuel duty they pay. Until now, electric cars have not had an equivalent mechanism, as they run on grid electricity, which carries no such levy at point of use.
The new pay-per-mile tax is intended to create a similar link between distance travelled and taxation for drivers of electric-powered vehicles. It forms part of a broader move to make vehicle taxation fairer as the vehicle parc changes.
Fears that the tax could slow the EV transition
The UK is set to ban the sale of new petrol and diesel cars by 2030, a target that relies on a rapid take-up of electric vehicles. However, the introduction of a new cost on EV ownership has sparked concerns that it could act as a deterrent just when the transition needs to accelerate.
Simon England, founder of ALA Insurance, expressed those fears directly. He said: “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.”
England’s comments reflect a wider debate among motoring organisations, which have warned that the removal of tax advantages for EVs, combined with new charges like this, could undermine government climate targets. Industry data shows that while EV sales have grown, they still lag behind what is needed to meet the 2030 ban.
Who will be affected by the pay-per-mile tax?
The tax is targeted at two vehicle types: battery-electric cars, which run purely on electricity, and plug-in hybrids, which can also on petrol or diesel. Owners of these vehicles will need to budget for the new charge from April 2028.
Traditional hybrid cars that cannot be plugged in, such as the self-charging models popular in many segments, are not covered by this announcement. Nor are conventionally fuelled petrol and diesel cars, because they already pay fuel duty on every litre.
The government has not yet confirmed how the per-mile data will be collected – whether through odometer readings, annual declarations, or a linked system similar to the existing car tax payment process. Such details are expected to be set out in the run-up to implementation.
Key facts for drivers
- Electric vehicles: 3p per mile charge.
- Plug-in hybrids: 1.5p per mile charge.
- Charge applies on top of standard vehicle excise duty.
- Average 8,000-mile annual driving adds £240 for a pure EV.
- Tax starts in April 2028.
What happens next
The confirmation of the new tax rate gives drivers a clear idea of what to expect when the policy comes into force. Those considering an electric car or plug-in hybrid will need to factor this ongoing cost into their total ownership calculations.
With more than two years until implementation, there may be consultations or adjustments to the plan. But as things stand, the pay-per-mile tax is set to become a permanent feature of motoring costs for electric-powered vehicles.
