Chancellor Unveils New Mileage-Based Tax for Electric and Hybrid Vehicles
Chancellor Rachel Reeves has officially announced the introduction of a new tax that will charge drivers based on the distance they travel each year. This measure specifically targets owners of electric vehicles (EVs) and plug-in hybrids, with rates set at 3p per mile for EVs and 1.5p per mile for hybrids.
Financial Impact on Motorists
For drivers covering approximately 12,000 miles annually, this new tax will result in an additional charge of £360 per year. The average UK motorist, who typically drives around 8,000 miles each year, will face a cost of £255 under this new system.
Millions of drivers who undertake long commutes or reside in rural areas with limited public transport options are expected to be particularly affected by this change, as they often exceed the average mileage figures.
Implementation Timeline and Rationale
The new Electric Vehicle Excise Duty (eVED) is scheduled to launch in April 2028. Government ministers have explained that this initiative responds to declining fuel duty revenues, which have been impacted by the increasing shift toward electric vehicles.
Treasury minister Dan Tomlinson stated: "At Autumn Budget 2025, the Government announced the introduction of Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028."
How the New Tax System Will Operate
According to official consultation documents, the eVED will be implemented alongside existing Vehicle Excise Duty (VED), meaning drivers will pay for their mileage in addition to their standard road tax. The government has emphasized that this system will not require tracking devices in vehicles or create a completely new tax infrastructure.
The consultation document clarifies: "It will be set at half of the equivalent rate of fuel duty for electric cars, and half again for plug-in hybrid cars. eVED will ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle."
Government Justification and Concerns
Ministers argue that the new tax creates a fairer system, as drivers who travel greater distances already incur higher fuel and duty costs. However, there are concerns that this additional charge could potentially discourage the transition to electric vehicles, despite government assurances that incentives will remain in place.
This announcement follows previous measures targeting specific vehicle types, including charges for particular number plates, as the government seeks to adapt taxation systems to changing automotive technologies and usage patterns.
