Diesel vehicle owners in the United Kingdom are confronting substantial tax burdens that could reach 86 pence per litre, as the government prepares to implement a new pay-per-mile system for electric vehicles. This significant financial pressure on traditional fuel users comes alongside the announcement of Electric Vehicle Excise Duty (eVED), scheduled to commence in April 2028.
Current Diesel Tax Breakdown
The average retail price for diesel currently stands at 140.83 pence per litre across the UK, with premium diesel reaching 161.48 pence. Analysis from the RAC reveals that over 60% of the amount paid at the pump flows directly to the Treasury through various taxation mechanisms.
The existing tax structure comprises 57.95 pence per litre in standard fuel duty, supplemented by 20% Value Added Tax (VAT). When combined with vehicle excise duty and showroom taxes, these levies contribute more than £40 billion annually to government revenues.
Electric Vehicle Taxation Changes
From 2028, electric vehicle owners will encounter new financial obligations through the eVED system. Fully electric cars will be subject to a 3 pence per mile charge, while plug-in hybrid vehicles will face a reduced rate of 1.5 pence per mile.
Dan Tomlinson, Exchequer Secretary to the Treasury, clarified the government's position: "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. Drivers will pay for their mileage alongside their existing Vehicle Excise Duty (VED)."
Government Rationale and Industry Response
Chancellor Rachel Reeves explained the policy's underlying principle to Parliament: "Because all cars contribute to the wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just by the type of car they own."
The additional revenue generated through these measures is intended to substantially increase road maintenance funding in England throughout the current parliamentary term. The government has committed to doubling investment in infrastructure upkeep as part of this initiative.
Broader Transport Policy Implications
Beyond vehicle taxation reforms, the Chancellor announced plans to enhance competition within the taxi industry. This involves restricting ride-hailing companies from utilising discount schemes originally designed for coach tours, a measure some industry observers have labelled a "taxi tax."
Steve McNamara, General Secretary of the Licensed Taxi Drivers' Association, welcomed this development, describing it as "a landmark moment for fairness and integrity in our industry."
These comprehensive transport taxation changes represent a significant shift in how road usage is funded in the UK, balancing traditional fuel taxation with emerging systems for electric vehicles while addressing broader industry competition concerns.
