Electric Vehicle Owners Face New Mileage-Based Tax in 2028
Electric vehicle (EV) owners are facing a significant increase in running costs, raising concerns among drivers amid the ongoing cost-of-living crisis. Chancellor Rachel Reeves introduced a pay-per-mile tax targeting EV and plug-in hybrid owners in the Autumn Budget of 2025. The new tax, dubbed eVED (electric Vehicle Excise Duty), will come into effect in April 2028.
This represents a shift from the previous system where EV owners were exempt from road tax, a benefit that ended in April 2025. Under the new plan, drivers of electric vehicles will be charged 3 pence per mile, while those with plug-in hybrids will pay 1.5 pence per mile.
The financial impact will vary based on annual mileage. For example, a driver covering 10,000 miles a year would face an annual charge of £300. The average British motorist drives approximately 8,500 miles annually, but many exceed this figure.
The introduction of eVED is primarily a response to declining fuel duty revenues as the adoption of electric vehicles accelerates. The government acknowledges the need to ensure all vehicle users contribute to road funding, as traditional fuel duty income diminishes.
Treasury minister Dan Tomlinson explained the government’s rationale, stating: “At autumn Budget 2025, the Government announced the introduction of Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028. Drivers will pay for their mileage alongside their existing Vehicle Excise Duty (VED).”
A consultation document released by the Treasury clarifies that eVED will be set at half the equivalent rate of fuel duty for electric cars and half again for plug-in hybrid cars. The document emphasizes that the tax will “ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle.”
The government has assured drivers that eVED will not rely on tracking devices installed in vehicles, nor will it require a new tax system. Instead, mileage verification will be integrated into the existing annual MOT test for cars over three years old. Vehicles under three years old will undergo additional mileage checks at garages, funded by the government at no cost to motorists.
Concerns have been raised regarding the potential for inaccuracies in mileage reporting. The government acknowledges that in-vehicle odometers are susceptible to tampering, or “clocking,” and is exploring mitigation strategies. The consultation document does not detail specific measures to prevent odometer fraud, but indicates that the issue is being addressed.
The new tax is expected to disproportionately affect individuals with long commutes or those residing in rural areas, who typically drive higher annual mileages. However, government officials point out that petrol and diesel vehicle owners already bear similar costs through fuel taxes.
The Office for Budget Responsibility (OBR) estimates that the new tax will generate revenue equivalent to approximately half the fuel duty rate paid by drivers of petrol cars. This suggests the government is aiming to recoup a significant portion of the lost fuel duty revenue as EV adoption increases.
The implementation of eVED is also prompting discussion about broader reforms to vehicle taxation. Some have proposed taxing all vehicles by mileage, regardless of fuel type, or adjusting fuel duty to incentivize EV adoption. However, the current plan focuses specifically on addressing the revenue shortfall created by the shift to electric vehicles.
The government is currently consulting on the precise details of the scheme, including the mechanisms for mileage verification and payment processing. The consultation aims to gather feedback from stakeholders and ensure a smooth implementation of the new tax in April 2028.
Despite the new tax, the government continues to offer substantial support for electric vehicle ownership. A £3.6 billion support package has been committed, aiming to maintain the value proposition of EVs. The government also highlighted that electric car salary sacrifice schemes remain protected until 2030, offering potential savings for employees.
the threshold for the Expensive Car Supplement has been raised from £40,000 to £50,000, providing additional savings for drivers opting for premium electric vehicles through salary sacrifice schemes. This suggests the government is attempting to balance revenue generation with continued encouragement of EV adoption.
