Autumn Budget 2025: EV pay-per-mile tax confirmed – Fleet World
The Chancellor is pushing ahead with plans for an EV pay-per-mile tax despite widespread condemnation.
The EV charge will be set at 3p per mile for battery electric cars and 1.5p for plug-in hybrid cars in 2028/9
Dubbed Electric Vehicle Excise Duty (eVED), the new mileage-based charge on electric and plug-in hybrid cars was confirmed in the leaked Office for Budget Responsibility (OBR) growth forecast and will be implemented from April 2028 to help counter declining fuel duty revenue as drivers switch to EVs.
For 2028/29, the EV charge will be set at 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrid cars, with the rate per mile increasing annually with CPI. This means the average driver of a battery electric car in 2028/29 driving 8,500 miles will be charged £255; roughly equivalent to half the rate of fuel duty tax paid per mile by drivers of petrol and diesel vehicles. Electric commercial fleet vehicles will be excluded.
The charge will be levied in addition to the current vehicle excise duty (VED) charges paid by all vehicles; as of 1 April 2025, electric vehicles are liable for VED and the Expensive Car Supplement.
The new charge is expected to raise £1.1bn in 2028/29, rising to £1.9bn in 2030/31; although the OBR document says the yield from the measure is uncertain as it’s dependent on the uptake of electric vehicles over the next five years.
The revenue generated from eVED will support investment in maintaining and improving the condition of roads across the country.
The Treasury said: “All cars contribute to wear and tear on our roads, so it is only right that our motoring taxes cover EVs via a modest per mile levy, with extra support to keep EV ownership attractive.”
The OBR said the new charge is likely to reduce demand for electric cars; over the forecast period, it estimates there will be 440,000 fewer electric car sales. But 130,000 of these lost sales will be offset by an expected increase in sales due to the Electric Car Grant, which gets extra funding, plus an increase to the Expensive Car Supplement (ECS) threshold for battery electric cars, from £40,000 to £50,000 in April 2026.
The OBR document also confirms a further freeze to fuel duty rates until September 2026.
The Government has also confirmed changes are in store too for plug-in hybrids too with confirmation of a tax easement.
The European Union’s new Euro 6e-Bis regulation could see the official carbon dioxide emissions of PHEVs hike up significantly, eroding their Benefit-in-Kind benefits for fleet drivers. But in the Budget statement, the Government said it introduce a temporary tax easement in the BiK system to prevent their tax charge increasing significantly due to the new emissions standards. This easement will be in place until 5 April 2028.
RAC head of policy Simon Williams said: “The Government will be aware that taxing all plug-in vehicles per mile from 2028 could slow down the transition to electric vehicles. This is no doubt why it has expanded the Electric Car Grant.
“With fuel duty revenue set to decline as more EVs come on to the road, this is one lever the Chancellor clearly feels she can pull to keep the money coming in. The implementation will be critical, so the devil is very much in the details.
“We note the Government hasn’t cut VAT on public charging from 20% to 5% to match the rate levied on domestic electricity. This means drivers who can’t charge at home will continue to pay more.”
The AA said the new EV tax must be simple, trusted and equitable for all road users.
Edmund King, AA president, commented: “Getting the timing right is crucial, and there will be concerns that should pay-per-mile for EVs be introduced too soon it may put slow down the switch to electric cars.
“Drivers will naturally have questions about such a scheme, which is why the AA will lead the charge for a fair and transparent system which is easy to understand. We will also need protections for certain groups, such as carers who use their car for work and rural drivers who are more car dependent.
“Other considerations such as appointing a truly independent body to determine the rate would help give confidence to drivers and improve the level of trust in the system.”
Tanya Sinclair, CEO, Electric Vehicles UK, mirrored the AA’s concerns.
“The UK’s motoring tax system needs fundamental, long-term reform. Change is inevitable as more drivers switch to electric, and no government enjoys having to wholesale reform car taxation. But the key question is how. The new pay-per-mile scheme proposed today must be designed carefully, consulted on properly and explained transparently.”
Meanwhile, InstaVolt warned that introducing an EV tax at this early stage risks putting off drivers who are considering making the switch to electric by layering on new costs.
Delvin Lane, CEO, added: “The Government must also consider the disproportionate impacts that such a scheme will have on drivers without home charging, who are already paying 20% VAT on public charging vs 5% at home, and on rural/low-income commuters.
“We urge the Government to work closely with the charging and automotive sectors to co-design a fair, future-proof system that maintains incentives to switch to zero-emission vehicles while ensuring sustainable road taxation.”
And Julian Mensah, CEO of Voltric, said: “A pay-per-mile tax on EVs cuts the electric car market down at the knees and hurts the motorists that need the most support. Salary sacrifice schemes have allowed people with less disposable income to switch to electric cars in recent years, and this tax will make a material difference to their finances. If the Chancellor wanted to raise more money from motorists, there were many more levers to pull – such as fuel duty or a tax on hybrids – before this one.”
John Lewis, CEO at on-street charging firm Char.gy, said: “While road-tax reform is understandable, introducing pay-per-mile charges too early risks discouraging people who are on the fence about switching. For the many drivers who depend entirely on public and on-street charging, adding new usage-based costs creates uncertainty and may slow adoption.”
Jon Lawes, managing director at Novuna Vehicle Solutions, said the new costs for EV drivers risk undermining confidence just as the Government allocates substantial additional funding for the Electric Car Grant scheme.
“EVs have only recently lost their VED exemption, and while upping the threshold to £50,000 for the Expensive Car Supplement is welcome, the confirmation of the pay-per-mile charge effectively turns this into VED-plus.
“The new subsidies are welcome, but set against these tax changes, it still feels like one step forward and two steps back. If the Government is serious about reaching its ZEV mandate targets, it must fix the basics: high upfront costs, inconsistent charging access, and higher prices for drivers without home charging. Without a coherent strategy, the positive impact of subsidies risks being cancelled out by inconsistent policymaking that slows the transition and weakens progress towards the Government’s own targets.”
According to Vaylens, the extra overhead is a cost many businesses won’t be able to absorb.
Russell Olive, UK director at the charging management software company, said: “For businesses juggling hundreds of electric vehicles, this could be an additional £40k on the books a year. At a time when every line on the balance sheet is under scrutiny, this extra overhead is a cost many businesses won’t be able to absorb. The added financial and administrative burden has also not been thought through. Companies will need new processes to gather the data and comply.
“Not every business is EV-ready yet, and loading additional barriers onto early adopters is a sure way to stall progress. The path to wider EV take-up is built through smarter policy, better infrastructure, data-driven fleet planning and more intelligent energy management, not new costs.”
The Energy and Climate Intelligence Unit (ECIU) said that while this tax could cause confusion and put drivers off, the economic argument for making the move to electric driving remains strong.
Colin Walker, head of transport, added: “Even with a 3p per mile charge, our analysis shows that EVs would remain significantly cheaper to run than petrol cars, delivering ownership savings of over £1,000 a year.”
Autumn Budget 2025EV pay-per-mile tax
Natalie has worked as a fleet journalist for over 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. 
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