Electric vehicle (EV) owners in the UK could be hit with an average annual charge of £267 under the Labour government's proposed new road tax system, according to fresh analysis.
The Details of the Proposed Pay-Per-Mile Levy
The planned pay-per-mile tax, slated for introduction in 2028 as part of an Autumn Budget, represents a fundamental shift in how road usage is taxed. The analysis, conducted by ALA Insurance, a prominent GAP insurance provider, used Department for Transport mileage data and UK vehicle registration figures to calculate the potential impact.
Under the current proposal, drivers of battery-electric vehicles would be charged 3p for every mile they drive. Owners of plug-in hybrid electric vehicles (PHEVs) would face a lower rate of 1.5p per mile.
Based on average national mileage, this would see the typical EV driver paying an extra £267 per year. The research estimates that from battery-electric vehicles alone, the Treasury could generate a staggering £466,449,000 annually in revenue.
Filling the Fuel Duty Gap and Industry Concerns
Simon England, founder of ALA Insurance, explained that the move is a direct response to the government's need to recoup declining fuel-duty income as more drivers switch to electric power. "Fuel duty and road tax have long provided a reliable income stream, but the recent rise in electric vehicle adoption has created a gap in government revenue," he stated.
However, England criticised the timing and approach of the policy. He warned that the new tax risks discouraging drivers from making the switch to electric ahead of the 2030 ban on new petrol and diesel cars.
"A gradual levy introduced earlier in the EV transition may have been easier for motorists to accept," England commented. "Even a small tax on public EV charging could have helped balance revenue without penalising early adopters."
Practical Challenges and Calls for Incentives
A significant practical question remains unanswered: how will mileage be monitored for newer vehicles that do not yet require an MOT? The government has not yet detailed the proposed method for tracking distance travelled.
Instead of the new charge, England advocated for stronger incentives to boost EV adoption. "Further incentivising electric cars would have been far more beneficial, allowing consumers to switch before being forced to," he argued.
He suggested that trade-in support or enhanced part-exchange offers would help accelerate the transition to electric vehicles without disproportionately impacting drivers who cannot switch immediately. The coming years will see further debate as the 2028 implementation date for the pay-per-mile model draws closer.
