Pay-per-mile: All you need to know about the new electric car tax – London Evening Standard
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Up to half a million Londoners face being hit by the new pay-per-mile tax on electric vehicles, The Standard can reveal.
The levy will be introduced in April 2028, with owners of 100 per cent electric vehicles – otherwise known as battery electric – paying 3p per mile.
Drivers of plug-in hybrids – which have a petrol engine in addition to a small battery – will pay 1.5p per mile, in recognition of the fact that fuel duty will continue to be paid on the petrol.
But what do the changes mean for drivers – and how will the amount due be calculated? Here’s what you need to know.
The first thing to make clear is that drivers won’t be required to fit a tracking device to their vehicle.
Instead, they will make an annual estimate of how many miles they will drive over the next 12 months.
If they then pay too much, they’ll get a refund. If they underestimate and pay too little, the debt will be added to the amount they are due to pay in vehicle excise duty (commonly, if mistakenly, known as “road tax”), which is typically £195 a year.
The pay-per-mile system will become part of the vehicle excise duty (VED) system currently operated by the DVLA, and will be known as “eVED”.
The general aim is for EV drivers to pay their pay-per-mile bill in advance when they also pay their annual vehicle tax bill.
Yes. The consultation documents state: “eVED will not require ‘trackers’ in cars, nor will the government ask people to interact with a whole new tax system: car drivers will pay for the miles they drive alongside paying their usual road tax (VED).
“The government has taken an approach that protects motorists’ privacy; there will be no requirement to report where and when miles are driven or install trackers in cars.”
A London MP, Dan Tomlinson, is in charge of the 16-week consultation on pay-per-mile that has been launched by the Treasury.
He is the Labour MP for Chipping Barnet and is a former Tower Hamlets councillor. At the Treasury, he holds the ministerial role of Exchequer Secretary to the Treasury.
In a forward to the consultation documents, Mr Tomlinson said that reform of vehicle taxation was overdue, in large part because of the increased popularity of electric cars, which are not currently liable for fuel duty in the same way as petrol and diesel vehicles.
He said: “Today, drivers of petrol and diesel vehicles pay tax on how much they drive through fuel duty at the pump, while drivers of electric vehicles currently make no equivalent contribution.
“If we do nothing, then by 2030 around one in five car drivers are expected to pay no fuel duty at all, while other motorists will continue to contribute an average of £480 a year. Given all cars cause congestion and wear and tear on the roads, this is not a fair outcome.”
The rates on petrol and diesel for the average car equates to around 6p per mile, meaning the average petrol and diesel driver pays around £480 per year in fuel duty.
Fuel duty raised £24.4bn in 2024-25 and is payable on petrol, diesel and other fuels. Vehicle excise duty (VED) raised £8.4bn in 2024-25. Fuel duty is expected to fall to about £12bn a year due to the switch to electric vehicles.
According to TfL’s annual Travel in London report, there were 235,925 electric cars registered in London by June this year. Of these, the majority 149,457 – were battery electric cars, which will be liable for the higher 3p per mile surcharge.
Nine per cent of all cars registered in London are electric. But the number is growing each year and will be around 500,000 by the time the pay-per-mile tax launches in two-and-a-half years.
The Government says the £12bn that it faces losing in fuel duty is the equivalent to funding nearly 70% of GP appointments that have taken place in England in the last year. “Doing nothing about this would be fiscally irresponsible,” ity says in the consultation.
VED is administered by DVLA, which will also administer eVED. Alongside paying their VED each year, under eVED motorists will estimate their mileage for the year ahead, pay an upfront charge based on their estimate or spread their payment across the year, and then submit their actual mileage at the end of the year to trigger a reconciliation.
Motorists will have their mileage checked annually typically during their MOT as is already the case, or for new cars, around their first and second registration anniversary.
For new cars, as with VED, dealerships will have the option to pre pay and bundle eVED mileage into the on-road price of a car.
Alternatively, the vehicle owner will be able to make their own arrangements and estimate their mileage for the remainder of the tax period, for eVED purposes.
The mileage estimation process may feel familiar to motorists who are already required to estimate their annual mileage for the purposes of car insurance.
No. Just like VED, it can be paid monthly – but this may result in a higher overall charge, though that will have to be made clear following the consultation.
DVLA are considering detailed plans for how the system for managing under and over payments will be implemented in practice, including considering interactions with enforcement and compliance activities, and will set out further details in due course.
It will be the registered keeper” – namely, the official owner. So if a parent allows their son or daughter to use their car, it will be the parent’s responsibility to pay the road charge.
The mileage already paid for will remain with the vehicle. This mileage will be made visible via DVLA online to the new owner. The government expects the eVED status of the vehicle (whether it is sold with pre-paid mileage or a mileage deficit) to be reflected in the sale price.
Yes, quite possibly – though that is illegal. Estimates have suggested that around 2.3% of UK vehicles may show signs of clocking. The government recognises that the introduction of eVED may increase the likelihood of motorists choosing to clock their vehicles, or allowing the odometer to be inoperative.
The pay-per-mile levy has already been dubbed the “poll tax on wheels” by the Daily Telegraph. A change in the rules, to enable the Government to tax electric vehicles, has been inevitable.
The consultation opened on Budget Day, November 26m and will run until March 18, 2026.
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