UK to launch pay-per-mile tax for electric vehicles in 2028

The UK government will introduce a mileage-based road tax for electric vehicles starting in April 2028 to offset the collapse of fuel duty revenue. The new electric Vehicle Excise Duty (eVED) marks a fundamental shift in how the state funds road infrastructure as the nation transitions away from internal combustion engines.

Under the plan announced in Budget 2025, the government will apply a charge for every mile driven by electric cars. Proposed rates are set at 3p per mile for battery electric vehicles (BEVs) and 1.5p per mile for plug-in hybrids (PHEVs). This mileage charge is not a replacement for existing taxes but an additional cost that sits on top of the standard annual Vehicle Excise Duty (VED). The cost structure for customers will effectively become the annual road tax plus the pay-per-mile charge.

The revenue gap

For decades, the UK has relied on fuel duty as a primary source of funding for road maintenance and transport infrastructure. However, as the government pushes for decarbonization and more drivers adopt EVs, this revenue stream has steadily declined. The introduction of eVED is designed to create a sustainable long-term funding model that ensures road users continue to contribute to the network regardless of their powertrain. The government expects the tax to generate £1.1bn in its first year of operation during the 2028–29 period.

Industry contradictions

The move creates a significant tension between fiscal policy and government environmental campaigns. Initiatives have long emphasized the cost-saving benefits of switching to electric power, specifically highlighting the lower running costs compared to petrol or diesel. By introducing a per-mile levy, the government is effectively removing a portion of that financial incentive.

Industry experts warn that this shift could dampen consumer confidence and slow the adoption of BEVs. There is a concern that buyers may seek more predictable running costs, potentially increasing demand for efficient internal combustion engine vehicles or hybrids as the financial advantage of going fully electric diminishes.

Looking ahead

As the 2028 deadline approaches, the government will need to establish the mechanisms for accurately tracking and reporting mileage for millions of vehicles. While the core rates and start date are confirmed, the industry remains watchful for further details on how this data will be collected and whether any exemptions will be granted for low-income drivers or specific vehicle types. For now, the transition signals the end of the 'tax-free' era for electric motoring in the UK.