New EV Per-Mile Tax and
What It Means for Drivers
Budget 2025 introduces Electric Vehicle Excise Duty — a landmark new charge paid per mile from April 2028. Here is everything UK drivers, fleet operators, and businesses need to know.
For decades, petrol and diesel drivers have contributed to the cost of maintaining UK roads through fuel duty — a charge paid every time they fill up at the pump. But as electric vehicles become mainstream, that arrangement has grown increasingly lopsided. EV drivers have been enjoying largely tax-free motoring, while the Treasury has watched fuel duty receipts head steadily downward.
Budget 2025 addresses that imbalance head-on. Chancellor Rachel Reeves announced the Electric Vehicle Excise Duty (eVED) — a new mileage-based charge that will apply to electric and plug-in hybrid cars from April 2028. Alongside it came a substantial package of support measures designed to ensure the EV transition remains financially attractive for millions of UK drivers.
This guide breaks down every element of the reform: what you will pay, how the charge works, what it means for fleets and company car drivers, and how the new incentives could offset costs for those switching to electric.
Why Is This Happening Now?
The context matters. The OBR — the UK's independent fiscal watchdog — has forecast that fuel duty receipts will decline to around half their current levels (roughly £12 billion) by the 2030s as EV adoption rises. By 2050, those receipts are expected to approach zero. Roads, meanwhile, still need to be maintained regardless of what powers the vehicles using them.
All vehicles contribute to congestion and wear and tear on roads — but petrol and diesel drivers have been paying fuel duty at the pump to reflect this, while EV drivers have not. eVED is designed to restore that fairness.
The government's position is clear: EVs are the future, and the transition should continue to be supported. But as the charging network matures and electric vehicles become the norm rather than the exception, it becomes harder to justify a complete tax exemption on road use. The solution is a per-mile charge set well below the equivalent fuel duty rate — ensuring EV driving remains economical, whilst ensuring all road users contribute.
The Rates: 3p Per Mile for EVs, 1.5p for Hybrids
From April 2028, two rates will apply under eVED:
| Vehicle Type | eVED Rate | Estimated Annual Cost* | Status |
|---|---|---|---|
| Full Battery Electric Vehicle (BEV) | 3p per mile | ~£240 per year | In scope from Apr 2028 |
| Plug-in Hybrid Electric Vehicle (PHEV) | 1.5p per mile | ~£120 per year | In scope from Apr 2028 |
| Petrol / Diesel Car | ~6p equiv. via fuel duty | ~£480 per year equiv. | No change |
| Vans, HGVs, Motorcycles, Coaches | Not applicable | — | Out of scope initially |
*Based on average annual mileage of approximately 8,000 miles.
The government has deliberately set the EV rate at approximately half the equivalent fuel duty burden paid by petrol and diesel drivers. The plug-in hybrid rate is half the full EV rate again — reflecting that PHEVs also consume conventional fuel for some of their journeys and therefore already contribute partially through fuel duty.
Vans, buses, motorcycles, coaches, and HGVs will be outside the scope of eVED when it is introduced in April 2028. The government has acknowledged that the transition to electric power for these vehicle types is less advanced than for passenger cars. This is significant for sole traders, small businesses, and hauliers operating electric vans — they will not face this charge at launch.
How Will the Charge Be Collected?
One of the most common questions is practical: how will HMRC know how many miles you have driven? The government has been explicit on privacy.
eVED will be paid annually alongside the existing Vehicle Excise Duty (VED). There will be no requirement to install tracking devices in vehicles, and no obligation to report where or when miles were driven. The government has committed to protecting motorists' privacy throughout the implementation of this charge.
A formal consultation — which closed in March 2026 — sought views from industry and motoring groups on the precise mechanics of how mileage will be reported and verified. The exact self-declaration or odometer-reading mechanism is still being finalised, with HMRC working closely with the automotive sector to develop a workable, fraud-resistant system ahead of the April 2028 start date.
eVED will be declared and paid as part of the existing VED renewal process. No GPS tracker or in-car telemetry will be mandated. The government will confirm the precise reporting mechanism following the consultation period. Drivers should monitor HMRC guidance updates through 2026 and 2027 for further detail.
What Will You Actually Pay? Real-World Scenarios
The average EV driver will pay around £240 per year — equivalent to £20 per month. But the real cost depends heavily on how much you drive. Here are worked examples for typical driver profiles:
🚗 Low-Mileage Driver (6,000 miles/year)
🚗 Average Driver (8,000 miles/year)
🚙 High-Mileage Driver (15,000 miles/year)
🔋 Plug-In Hybrid Driver (12,000 miles/year)
Even at 15,000 miles per year, the £450 annual charge for a full EV driver is well below what a comparable petrol driver would pay in fuel duty — which HMRC estimates at roughly £480 per year for a driver of average mileage, before accounting for the much lower per-mile energy cost of electric motoring.
Impact on Fleets and Company Car Drivers
For fleet operators and businesses with company vehicles, eVED introduces a new cost line to budget for — but the picture is more nuanced than the headline rate suggests.
Fleet Operators
Businesses running electric car fleets will need to factor eVED into total cost-of-ownership (TCO) calculations. A fleet averaging 20,000 miles per vehicle per year will incur an annual eVED liability of £600 per electric car. For a 50-vehicle electric fleet, that equates to £30,000 per year in additional motoring tax from April 2028.
Critically, vans are excluded from the initial scope of eVED. Businesses operating electric van fleets — common in logistics, utilities, and trades — will not be affected at launch. This is a meaningful carve-out for commercial operators.
Company Car Tax: Employee Car Ownership Schemes Delayed
Budget 2025 also delivered welcome news for anyone participating in an Employee Car Ownership Scheme (ECOS). The original plan — announced at Autumn Budget 2024 — was to bring ECOS within the Benefit-in-Kind tax rules from April 2026. That has now been delayed until April 2030, with transitional arrangements for those still in contracts at that date running until April 2031.
This gives businesses and employees considerably more time to plan around the change, and ensures those who have already committed to ECOS arrangements are not caught out by an abrupt legislative shift.
Plug-in Hybrid Benefit-in-Kind Easement
A temporary Benefit-in-Kind tax easement for plug-in hybrid vehicles has also been introduced to prevent their tax charge rising sharply due to new emissions standards. This easement runs from 1 January 2025 to 5 April 2028 — again, providing a bridge for drivers and fleet managers currently committed to PHEV vehicles.
First-Year Allowances Extended
Businesses investing in zero-emission vehicles and EV charging infrastructure can continue to claim 100% first-year allowances (FYAs) for an additional year. The extension covers qualifying expenditure on zero-emission cars and EV chargepoint infrastructure to 31 March 2027 for corporation tax purposes and 5 April 2027 for income tax purposes — maintaining a strong incentive for commercial EV adoption.
The additional year of 100% first-year allowances for zero-emission vehicles and chargepoints means that investment made before April 2027 can still be fully offset against taxable profits in the year of purchase. If your business is considering expanding an electric fleet or installing workplace chargepoints, the timing of that investment now has a meaningful tax dimension. Speak to your accountant before the deadline passes.
The £50,000 Expensive Car Supplement Change
Under current rules, any car costing more than £40,000 when new attracts an additional Vehicle Excise Duty surcharge — the Expensive Car Supplement — of £440 per year for years two to six of ownership. This threshold has long been criticised as a disproportionate burden on EV buyers, given that electric models generally carry a higher purchase price than their petrol equivalents.
Budget 2025 raises the Expensive Car Supplement threshold for zero-emission vehicles only from £40,000 to £50,000, with effect from 1 April 2026. The change applies to zero-emission vehicles registered from 1 April 2025 onwards.
The government estimates that over one million EV motorists will benefit from this change, saving £440 per year each. If you purchased a zero-emission vehicle costing between £40,001 and £50,000 on or after 1 April 2025, you will no longer face the Expensive Car Supplement from April 2026 onwards — a significant saving over the five years to which the surcharge would otherwise have applied.
It is important to note that this relief applies to zero-emission vehicles only — petrol, diesel, and conventional hybrid cars above £40,000 will continue to face the supplement at the existing threshold. This is a targeted measure to make higher-value EVs more financially comparable to their petrol equivalents.
Electric Car Grant Extended to 2030
The Electric Car Grant — launched in July 2025 — already helped over 35,000 drivers switch to an EV by offering up to £3,750 off eligible models. Budget 2025 significantly bolsters this scheme:
- An additional £1.3 billion of funding has been allocated to the programme
- The grant has been extended to run until 2029–30
- Total committed funding now reaches £2 billion
For buyers considering a new electric car, the grant remains one of the most direct mechanisms to reduce the upfront cost. Models eligible for the grant must meet specific criteria set by the Office for Zero Emission Vehicles — checking eligibility before purchasing remains essential.
£200 Million for EV Charging Infrastructure
Range anxiety and the availability of public chargepoints remain among the most cited barriers to EV adoption. Budget 2025 addresses both with a substantial infrastructure investment:
- £100 million invested in EV charging infrastructure, including home and workplace chargepoint installation, building on the £400 million announced at Spending Review 2025
- £100 million allocated to local authorities and public bodies to fund specialist staff and accelerate deployment of public chargepoints — building on the almost 87,000 public chargepoints already installed across the UK
- A 10-year 100% business rates relief for eligible EV chargepoints and EV-only forecourts — ensuring no business rates liability for the next decade
- A government review of public EV charging costs, examining the impact of energy prices and options for reducing consumer costs, reporting by Q3 2026
- A consultation on permitted development rights for cross-pavement EV charging, making it easier and cheaper for households without driveways to access home charging solutions
The 10-year 100% business rates relief for separately assessed EV chargepoints removes a significant cost concern for businesses considering on-site charging infrastructure. Combined with the 100% first-year allowance on capital expenditure (extended to April 2027), the tax environment for commercial chargepoint investment is unusually favourable right now.
Fuel Duty: 5p Cut Extended to August 2026
For drivers of conventional petrol and diesel vehicles, Budget 2025 also contains important news. The temporary 5p per litre cut in fuel duty — first introduced in March 2022 in response to rising energy prices — will be extended for a further five months, until the end of August 2026.
Thereafter, rates will be returned to pre-March 2022 levels in three stages:
- 1p increase from 1 September 2026
- 2p increase from 1 December 2026
- 2p increase from 1 March 2027
The planned inflation-linked increase for 2026–27 has also been cancelled. From April 2027, fuel duty will be uprated by RPI. The government estimates that, taken together with the launch of a fuel price comparison tool (Fuel Finder) from Spring 2026, these measures will save households with a car approximately £89 next year compared with previous government plans.
Key Dates at a Glance
Expensive Car Supplement threshold raised to £50,000
Zero-emission vehicles registered from 1 April 2025 benefit. VED rates for cars, vans, and motorcycles also uprated in line with RPI.
5p fuel duty cut expires — phased reversal begins
Rates rise 1p/litre on 1 September 2026, 2p on 1 December 2026, and a further 2p on 1 March 2027, returning to pre-March 2022 levels.
100% first-year allowances deadline (corporation tax)
Deadline for businesses to claim 100% FYA on zero-emission vehicles and EV chargepoint infrastructure (5 April 2027 for income tax).
eVED goes live
3p per mile for full EVs; 1.5p per mile for plug-in hybrids. Paid annually alongside VED. No tracking required. Vans excluded at launch.
Employee Car Ownership Schemes — BiK rules change
ECOS brought within Benefit-in-Kind rules (delayed from original April 2026 date). Transitional arrangements until April 2031.
The Bigger Picture: Road Maintenance and Net Zero
The revenue generated by eVED is earmarked for a specific purpose: road maintenance. By 2029–30, the government has committed to spending over £2 billion annually for local authorities to repair roads and fix potholes — doubling funding since taking office. The OBR's projections suggest eVED will raise £1.1 billion in 2028–29, rising to £1.435 billion in 2029–30 and £1.865 billion in 2030–31 as EV adoption grows.
The government is also pressing ahead with the DRIVE35 programme — a major support mechanism for UK automotive manufacturers — with an additional £1.5 billion allocated to 2035, taking total funding to £4 billion over ten years. This underscores the government's dual commitment: to EV adoption as a consumer choice, and to the UK retaining a globally competitive domestic automotive manufacturing sector.
What Should Drivers and Businesses Do Now?
eVED does not begin until April 2028 — you have time. But there are steps worth taking now, particularly if you are a business, fleet operator, or higher-mileage driver:
- Businesses with electric fleets: begin incorporating eVED into total cost-of-ownership models for post-2028 budgeting. At 3p per mile, the charge is predictable and linear — making it relatively straightforward to model.
- Individuals buying a new EV above £40,000: confirm whether your model falls under the new £50,000 threshold (from April 2026) to determine whether the Expensive Car Supplement applies.
- Businesses investing in chargepoints or zero-emission vehicles: review the timing of capital expenditure to maximise the 100% first-year allowance, which expires in April 2027.
- ECOS participants: the BiK rule change is now deferred to April 2030 — existing arrangements remain valid, but review your position with an adviser to understand the transition arrangements.
- All drivers: monitor HMRC guidance as the reporting mechanism for eVED mileage is confirmed, expected through 2026–2027.
Even with eVED, the financial case for electric vehicles remains strong. Lower per-mile energy costs, reduced servicing requirements, favourable company car tax rates, and the ongoing Electric Car Grant continue to make EVs a compelling choice. eVED represents the first step in a rebalancing of motoring taxation — not a reversal of EV policy.
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