Chancellor Rachel Reeves has confirmed a controversial new pay-per-mile tax that will hit certain drivers hard. Motorists will be charged based on the distance they travel each year under a radical shake-up of the UK's motoring tax system.
New charges for electric and hybrid vehicles
Owners of electric vehicles (EVs) and plug-in hybrids are the targets of this new levy. EV owners will be charged at a rate of 3p per mile, while hybrid drivers will face a rate of 1.5p per mile. The Government expects to raise additional revenue from motorists, though officials argue the change will create a fairer tax system.
Impact on drivers
For drivers covering 10,000 miles per year, the 3p rate will mean an additional £300 annually. The pay-per-mile rules are set to come into force in April 2028, with rates paid alongside existing vehicle tax. Millions of drivers who travel long distances monthly will see their bills increase significantly.
Critics fear the charge could discourage people from switching to electric vehicles. This is the latest financial blow for EV owners, who were already required to pay standard vehicle tax for the first time last year. Ministers argue that petrol and diesel drivers already pay based on distance traveled through fuel duty.
Industry reaction
Simon England, founder of ALA Insurance, commented: "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. The rise in EV adoption will leave quite a gap in the Government's revenue from road tax, but raising taxes for electric cars is definitely off-putting to people considering a switch, especially when they won't have a choice from 2030, as it stands."
