UK’s New Pay-Per-Mile EV Tax from 2028 Sparks National Debate: Revenue Fix or Roadblock to Electrification?

The UK Government has officially confirmed a landmark policy that will reshape the future of electric mobility: a pay-per-mile tax on electric and plug-in hybrid vehicles from April 2028. Introduced by Chancellor Rachel Reeves, the move aims to compensate for collapsing fuel-duty revenues as the country accelerates towards the 2030 ban on new petrol and diesel cars. 

While the government argues the levy is necessary and modest, industry bodies, EV advocates, and economists warn it may slow adoption at a pivotal moment for the UK’s net-zero transition.

Key Takeaways from the UK’s Pay-Per-Mile EV Tax Announcement

• New Mileage Charge: EVs to be charged 3p per mile, PHEVs 1.5p per mile, rising annually with inflation.

• Implementation Date: Policy takes effect from April 2028, collected alongside VED.
  
• Revenue Expectations: Government expects £1.1bn–£1.2bn annually initially, rising to nearly £7bn a year by 2050–51.
  
• OBR Impact Forecast: Up to 440,000 fewer EV sales in the next five years due to higher ownership costs.
  
• Support Measures:
  
  • £1.3bn extended Electric Car Grant (up to £3,750 discount)
    
  • £200m for charging infrastructure
    
  • 100% business-rate relief for charge-point operators for 10 years
    
• Charging & VAT Gap: Public charging taxed at 20% VAT vs 5% at home, raising concerns about fairness for drivers without home chargers.
  
• Industry Reaction: Widespread concern that premature taxation could slow EV adoption, worsen inequalities, and confuse consumers.
  
• Environmental Impact: Worst-case modelling warns of hundreds of thousands of tonnes of added CO₂ and NOx if drivers revert to petrol/diesel.
  

A Revenue Crisis and a Turning Point for UK Road Taxation

The government now faces a sharp decline in fuel-duty revenue as electric vehicles gain ground. Fuel duty currently delivers around £24.4 billion per year, but this figure will erode rapidly as sales of petrol and diesel cars decline ahead of the 2030 ban.

Chancellor Reeves argues that the new levy ensures “a fairer system for all drivers”, noting that EVs currently pay no equivalent to fuel duty. The Treasury believes pay-per-mile is the simplest and most politically manageable bridge to an inevitable long-term road-pricing system.

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The annual charge will likely be calculated through self-declared mileage or verified via odometer checks during MOTs.

How Much Will UK EV Drivers Pay from 2028?

A typical EV driver covering 8,500 miles a year will pay:

This is roughly half the per-mile rate petrol and diesel drivers effectively pay via fuel duty.

However, this comes on top of upcoming Vehicle Excise Duty changes that already brought EVs into the standard tax system:

• £10 first-year VED for new EVs from 2025
  
• £195 standard VED from year two
  
• £425 luxury car tax for EVs costing over £40,000 (threshold rising to £50,000 in April 2026)
  

Government Support: Grants, Reliefs and Infrastructure Investment

To offset the shock, the government paired the new tax with an expanded Electric Car Grant worth £1.3bn, offering up to £3,750 for eligible cars priced under £42,000 (increasing to £50,000 eligibility from 2026). Only select models qualify for the full amount, including:

• Ford Puma Gen-E
  
• Ford E-Tourneo Courier
  
• Citroën ë-C5 Aircross Long Range
  
• New UK-built Nissan Leaf
  

In addition, Reeves announced:

• £200m for faster charge-point deployment
  
• 100% business-rate relief for charge-point operators for 10 years
  
• Removal of VED from search-and-rescue vehicles
  

Despite this, public charging remains significantly more expensive due to VAT—20% compared to 5% at home. Public charging is expected to generate £315m for the Treasury by 2030.

What the Numbers Say: EV Adoption and Environmental Risks

Figures from different industry sources show the UK’s EV fleet is growing, though estimates vary:

• 1.3 million to 1.7 million EVs currently on the road
  
• EVs account for about 25% of new registrations, with a target of 80% by 2030
  

However, OBR modelling warns of 440,000 fewer EVs on the road due to the new tax.

Environmental researchers say this shift could have measurable consequences. If even a portion of EV drivers revert to petrol/diesel:

• 433,680+ tonnes of extra CO₂ annually
  
• 14.45 tonnes of added particulate matter
  
• 346.9 tonnes more NOx pollution
  
• 903,500 litres of extra engine oil used annually
  

Experts warn this could aggravate respiratory and cardiovascular health risks in urban areas.

Industry Reaction: A Unanimous Warning on Timing

Many industry leaders argue the policy is justified in principle but premature in practice.

The AA

Says timing is crucial: measuring miles is reasonable, but implementation must not discourage adoption.

EV Advocacy Groups

EVA England calls the tax “the wrong time to be taxing EV drivers when they still make up only 5% of UK vehicles.”

Charging Operators

Companies like InstaVolt, Fastned, char.gy, Be.EV and VEV warn that:

• People without home chargers already pay the highest costs
  
• VAT inequality is a “time bomb”
  
• The policy risks stalling investment in charging infrastructure
  

Think Tanks

The Resolution Foundation and Social Market Foundation caution that:

• Poorly designed policy could destabilize the EV market
  
• Lessons from New Zealand show EV sales collapse without adequate incentives
  
• Raising fuel duty might be a simpler, fairer alternative
  

A Broader Look at Motoring, Infrastructure and Regional Investment

Reeves paired the EV tax with major infrastructure commitments, including:

• Investment in the Lower Thames Crossing
  
• £13bn flexible funding for UK Mayors
  
• Support for AI growth zones, low-carbon projects, semiconductor development
  

Despite this, motor and fleet associations say key opportunities were missed, arguing that the government must act urgently on:

• Sky-high public charging costs
  
• Standing charges
  
• VAT disparities
  
• Grid connection delays
  

What This Means for the UK’s Road Ahead

The UK’s pay-per-mile EV tax marks a watershed moment in the country’s transition to clean transport. While the measure aims to safeguard long-term public finances, the timing has triggered widespread concern that it may slow momentum at the very moment EV adoption needs to accelerate. With 2030 ZEV targets approaching and fuel duty revenue collapsing, the government faces the challenge of balancing fairness, environmental ambition and economic reality.

Whether the new levy becomes a stepping stone toward a modernized national road-pricing system — or a stumbling block in the UK’s electric transition — will depend entirely on how clearly, carefully and collaboratively it is implemented.

FAQs on the UK’s Pay-Per-Mile EV Tax 2028

1. What is the new pay-per-mile tax for electric vehicles?

From April 2028, EVs will be charged 3p per mile and plug-in hybrids 1.5p per mile, rising annually with inflation.

2. Why is the UK introducing pay-per-mile charges on EVs?

The tax replaces falling fuel-duty revenue as drivers shift from petrol and diesel, helping the government maintain road-funding income.

3. How much will an average EV driver pay annually?

A driver covering about 8,500 miles yearly will pay approximately £255, roughly half the per-mile rate of petrol and diesel vehicles.

4. Will the new tax affect EV adoption in the UK?

OBR forecasts suggest around 440,000 fewer EVs on the road over five years due to increased ownership costs.

5. What support is the government offering alongside the new EV tax?

The government announced £1.3bn for the Electric Car Grant, £200m for charging infrastructure, and 100% business-rate relief for charge-point operators.