Autumn Budget 2025: Pay-per-mile tax for EVs and hybrids from 2028 – Business Motoring
Jessica Bird
26 November 2025
Company Car Trends, EV & Sustainability, Featured, News
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The Government has confirmed that a national pay-per-mile tax for electric and hybrid vehicles will be introduced in April 2028, setting a new system of road-use charges to replace declining fuel duty receipts.
According to OBR documents released ahead of the official statement, the Budget will introduce a charge of 3p per mile for EVs, following a consultation scheduled to begin next year.
Hybrids will be charged 1.5p per mile
Drivers will estimate their annual mileage and pay the charge when renewing their Vehicle Excise Duty (VED), with adjustments made the following year if mileage has been under- or over-estimated.
The Government said the reform is necessary to stabilise long-term road funding as fuel duty revenue continues to fall.
The Office for Budget Responsibility projected that the per-mile tax could generate around £1.9bn by 2031, helping to address the gap created by wider EV adoption.
However, it said that the scheme is likely to reduce demand for EVs, through increasing their lifetime costs.
It estimated that 440,000 fewer EVs will be sold over the next five years than initially forecasted.
For drivers, the charge is expected to add around £255 a year for those covering 8,500 miles. The new system will sit alongside existing VED, which EVs will begin paying from 2025.
EVs will also be liable for the Expensive Car Supplement (ECS), although the threshold has been increased to £50,000, compared to the £40,000 for internal combustion (ICE) and hybrid cars.
The announcement has prompted concern from parts of the automotive sector, with some industry figures warning that the tax risks slowing EV demand at a delicate moment for the market.
Critics argue that adding running-cost penalties could make plug-in models less attractive compared with older petrol and diesel vehicles.
Reaction:
Adrian Fielden-Gray, chief operating officer at Be.EV, said: “The Budget is clearly seeking to close the gap on public finances, put the economy into gear, and rev the engine of British growth.
“As laudable as the goal is, though, you have to wonder if the Chancellor’s approach is fully up to date with the realities of Britain’s national infrastructure and urgent energy transition needs.
“Tilting the scales back in favour of fossil fuel vehicles by adding extra costs on top of EV usage runs against the grain of both the progress we have made on road electrification and the destination that we need to be driving for.
“Change is difficult, and helping drivers to justify putting off the move to an EV isn’t helpful. The books do need to be balanced – but the Budget also needs to empower progress.
“Labour should stick to their public commitments and think in terms of plugging in, not pumping up, the ways we travel and the vehicles drivers choose.
“Millions still need to be convinced, and making EVs an ever more convenient choice against ICE vehicles is the right thing to do for people, communities, environment and the economy.
“It’s not too late to take action that truly charges up EV adoption and drives the economy forward.”
Business Motoring is the motoring resource for business fleets of all sizes, providing news, insights, and expert analysis for fleet operators, company car drivers, and industry professionals.
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