Electric vehicle (EV) drivers in the UK could face an additional £267 a year under the government’s upcoming pay-per-mile road tax, raising concerns that the policy may hinder progress toward the 2030 ban on new petrol and diesel cars.
How the tax works
The pay-per-mile tax, confirmed by Chancellor Rachel Reeves in the November 2025 Autumn Budget, is scheduled for introduction in 2028. It forms part of the new electric Vehicle Excise Duty (eVED), created to address the decline in fuel duty revenue as more motorists switch to zero-emission vehicles.
- EV drivers would pay 3p per mile.
- Plug-in hybrid (PHEV) drivers would pay 1.5p per mile.
According to the Office for Budget Responsibility (OBR), the levy is expected to raise £1.1 billion in its first year, increasing to £1.9 billion by 2030–2031.
ALA Insurance calculated the annual cost for EV owners using Department for Transport mileage data and UK registration figures. Based on an average of 8,900 miles a year for battery-electric cars, the charge reaches £267. Using the same data, ALA estimates the government could raise £466,449,000 annually from battery-electric vehicles alone. The Society of Motor Manufacturers and Traders (SMMT) projects more than 1.3 million battery-electric cars will be on UK roads by the end of 2024.
Mileage and cost table
| Car type | Average mileage | Average price per year | Total for all cars |
|---|---|---|---|
| Battery electric | 8,900 | £267 | £466,449,000 |
| Plug-in hybrid | 8,000 | £120 | £113,760,000 |
The OBR notes that the rate is roughly half the per-mile fuel duty paid by petrol and diesel drivers. Its estimate is based on an 8,500-mile average, although ALA uses the Department for Transport’s higher 8,900-mile figure.
Unclear monitoring system
The government has not confirmed how mileage will be recorded for newer vehicles before their first MOT. Treasury consultations outline options such as
- self-declaration
- odometer checks during annual MOTs
- dealer-recorded mileage for new cars
A public consultation will run until March 2026.
Industry reaction and revenue concerns
Simon England, founder of ALA Insurance, said the tax represents a significant change in how the government plans to recover lost fuel duty. “Fuel duty and road tax have long provided a reliable income stream, but the recent rise in electric vehicle adoption has created a gap in government revenue.”
Without a new system, the Treasury forecasts a £35 billion annual shortfall in fuel duty by 2030. EV uptake continues to grow, with sales reaching a record 381,970 units in 2024 and capturing 25% of the new car market in June.
England said an earlier, gradual introduction might have been more acceptable to drivers. “Even a small tax on public EV charging could have helped balance revenue without penalising early adopters.”
He warned the levy could slow adoption ahead of the 2030 ban. The OBR predicts the policy could result in 440,000 fewer EV sales over the next five years.
Industry groups, including the SMMT, argue the tax sends a “confusing message” and have called for more incentives to encourage drivers to switch. “Further incentivising electric cars would have been far more beneficial, allowing consumers to switch before being forced to,” England said. “Trade-in support or stronger part-exchange offers would help accelerate adoption without disproportionately impacting drivers unable to switch immediately.”
Budget measures to offset costs
The Autumn Budget contains several measures intended to support EV uptake
- From April 2026, the threshold for the £425 Expensive Car Supplement increases to £50,000 for EVs. Petrol and diesel models remain at the £40,000 threshold.
- £1.5 billion is allocated for charging infrastructure.
- EV charger installations receive 100% business rates relief for ten years.
- The Electric Car Grant, offering up to £3,750 for new EVs, receives extended funding.
Concerns from motorists
The AA has criticised the policy as a potential “poll tax on wheels,” arguing it could disproportionately affect rural drivers who rely on longer journeys. Some drivers already face rising costs, as public rapid charging can exceed petrol prices, although home charging remains far cheaper at around 2p per mile during off-peak hours.
EV registrations in 2025 have increased 29% year-on-year to 386,244. However, analysts warn the tax may add to existing concerns such as charging availability and range anxiety.
Looking ahead
As the UK moves toward its 2030 zero-emission target, the pay-per-mile tax highlights the challenge of balancing environmental ambitions with fiscal pressures. While early adopters still benefit from exemptions, the prospect of a £267 annual cost underscores the need for clearer implementation details to maintain momentum in the shift to electric vehicles..