Rachel Reeves' pay-per-mile car tax risks adding a new layer of cost for millions of drivers, it has been warned. New car tax changes are set to launch in April 2028 for electric and hybrid vehicle owners.
A 3p pay-per-mile car tax charge will be applied to millions of EV motorists. The rate, confirmed by Labour Party Chancellor Rachel Reeves last autumn, will be 1.5p for hybrid car owners.
Matthew Walters, EV expert at Ayvens, called the charge particularly significant and added: For many drivers, the appeal of going electric has been about simplicity and predictability - lower running costs, fewer moving parts, and clearer day-to-day expenses.
Introducing a mileage-based charge risks adding a new layer of cost and complexity at exactly the point confidence in EVs is starting to build.
Mr Walters warned: The bigger risk is behavioural: rather than switching back to petrol or diesel, more consumers may simply decide to wait and see how the market and policy environment evolves.
At a pivotal moment in the transition, that hesitation could slow momentum more than any single policy change on its own.
If you cover 8,000 miles per year, that works out to £240. Plug-in hybrid drivers will pay £120 per year to do 8,000 miles under the new scheme.
Industry experts are in talks with the government about ways to keep EV sales growing. One insider told The Telegraph that the Treasury is worried EVED could kill EV demand.
They added: The way we convince people to switch to EVs is by showing it is easy and cheap. There are real savings here for many drivers.
The Office for Budget Responsibility (OBR) also predicts the policy could put off drivers from switching, cutting EV sales by around 440,000 between November 2025 and March 2031.
But the Treasury has disputed OBR's figures, saying it will be closer to a 120,000 EV shortfall between now and the end of the decade.
