Motorists who own electric vehicles or plug-in hybrids will be required to pay a new pay-per-mile tax under plans announced by Prime Minister Andy Burnham. The levy, set at 3 pence per mile for fully electric cars and 1.5 pence per mile for plug-in hybrids, is scheduled to take effect in April 2028.
How the new levy works
The charge will be calculated based on the distance a vehicle travels over the course of a year, paid on top of standard vehicle excise duty. With the average UK driver covering around 8,000 miles annually, typical additional cost would be £240. However, those driving 10,000 miles per year will face a £300 bill. The tax is designed to address the shortfall in fuel duty revenue as more drivers switch to electric vehicles, but critics warn it could slow adoption.
Which vehicles are affected
The levy applies to all electric vehicles and plug-in hybrids, including some of the UK's best-selling models such as the Tesla Model Y and Model 3, Audi Q4 and Q6 e-tron, Ford Explorer, and BMW i4. The government aims to recoup lost tax income from fuel duty, which has declined as EV uptake increases. However, the timing of the tax – before the 2030 ban on new petrol and diesel cars – has raised concerns among industry experts.
Impact on drivers
Drivers who rely on their cars for work, long commutes, or those living in rural areas with limited public transport will be hardest hit. Simon England, founder of ALA Insurance, 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.”
Concerns over EV adoption
The pay-per-mile tax adds to a list of financial disincentives for EV buyers, including the end of the plug-in car grant and rising electricity prices. While the Treasury argues the levy is necessary to maintain road funding as the vehicle fleet electrifies, industry bodies fear it could undermine the transition. The policy remains subject to consultation, but if implemented as planned, it will represent a significant shift in motoring taxation.
