Chancellor Rachel Reeves' new pay-per-mile tax, announced in the last Autumn Budget, is set to roll out in 2028 and will impact millions of drivers across the UK. The proposal has sparked immediate controversy and scepticism, with some critics arguing it could undermine the Labour government's net zero goals.
Recent data from YouGov reveals that 55% of new car buyers are still considering a petrol engine, compared to just 37% looking for an electric vehicle, indicating that the majority of drivers continue to favour traditional fuel vehicles.
Which Cars Are Affected by the Pay-Per-Mile Tax?
The pay-per-mile tax is specifically aimed at electric vehicles (EVs) and plug-in hybrid vehicles, not ordinary petrol or diesel cars. Under current plans, the charge will be approximately 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrids.
This system, often referred to as eVED, is being introduced to recover tax revenue as the transition away from petrol and diesel reduces fuel duty income.
- Electric Cars: Charged at 3p per mile. For the average UK driver, this amounts to roughly £210 to £240 per year.
- Plug-In Hybrids (PHEVs): Charged at 1.5p per mile.
- Petrol and Diesel Cars: Not affected by this specific tax, as these drivers already contribute via fuel duty.
Estimated Annual Costs of Pay-Per-Mile
Costs will depend on how often you drive, but national averages provide a clear indication of what road users can expect.
Fully Electric Cars (3p per mile)
- 5,000 miles per year - £150
- 8,000 miles per year - £240
- 8,500 miles per year - £255
- 10,000 miles per year - £300
- 12,000 miles per year - £360
- 15,000 miles per year - £450
- 20,000 miles per year - £600
Plug-In Hybrid Cars (1.5p per mile)
- 5,000 miles per year - £75
- 8,000 miles per year - £120
- 8,500 miles per year - £128
- 10,000 miles per year - £150
- 12,000 miles per year - £180
- 15,000 miles per year - £225
- 20,000 miles per year - £300
The average UK driver covers roughly 8,500 miles annually. Under the reported proposal, an electric vehicle would cost about £255 per year, while a plug-in hybrid would cost about £128 per year.
What Do Motorists Think of the New Tax Proposals?
According to Carwow, if pay-per-mile were introduced to replace Vehicle Excise Duty (VED), many drivers would change their habits. Almost a third (31%) would drive less to control spending, 18% would consider switching to a more efficient or electric car, and 14% say the change could make driving unaffordable for them entirely.
Views also differ on how the scheme should be structured. Just over half (51%) think all motorists should pay the same rate per mile regardless of fuel type, while 28% believe electric-vehicle drivers should pay less to reflect their lower emissions.
Iain Reid, Head of Editorial at Carwow, commented: “These findings show motorists recognise the need for a fairer, more sustainable system as fuel duty revenues decline, but they also highlight deep concern about affordability. A move towards pay-per-mile taxation made by the Chancellor will need to balance fairness, simplicity and cost - to avoid penalising those who rely most on their cars. That said, a 3p per mile rate (as rumoured) for EVs would still be significantly less than ICE car drivers are paying in duty on fuel.
“As it always is, the devil will be in the details; how will it actually be implemented? Before EVs, we effectively had a pay-per-mile system through fuel duty: the more you drove, the more tax you paid. Now, it’s trickier.
“To ensure confidence and protect privacy, any new system should make smart use of technology - for example secure, app-based mileage reporting that’s simple for drivers and transparent about how data is used. With the right tech in place, pay-per-mile could be automated and accurate without relying on intrusive location tracking or cumbersome manual readings.”
