London, November 30, 2025
The UK government will implement a new pay-per-mile tax on electric vehicles (EVs) from April 2028, charging 3 pence per mile for full EVs and 1.5 pence per mile for plug-in hybrids. The policy aims to compensate for lost fuel duty revenue but may slow EV adoption by increasing ownership costs.
New EV Tax Rates and Financial Impact
Starting in 2028, owners of electric vehicles in the UK will face an additional charge based on the miles they drive. Full EVs will incur a 3p per mile tax, while plug-in hybrids will be taxed at 1.5p per mile. For drivers with average annual mileage, this could mean an added cost of approximately £300 per year.
Government’s Rationale Behind the Tax
The introduction of this pay-per-mile tax is intended to offset decreasing fuel duty revenues as more drivers transition from petrol and diesel vehicles to electric alternatives. Fuel duty has historically provided significant funding for road maintenance and related expenditures. With EVs not paying traditional fuel levies, the government is seeking to recoup these funds to balance the budget and sustain infrastructure financing.
Impact on EV Affordability and Adoption
Although the tax per mile is lower than the average fuel cost for petrol vehicles—which is roughly double the proposed EV mileage charge—the cumulative effect on EV ownership costs is substantial. Electric vehicles already carry approximately an 18% higher upfront purchase price compared to internal combustion engine vehicles. Additionally, EV owners often bear the expense of installing home charging infrastructure.
These financial burdens, compounded by the new mileage tax, risk undermining existing government incentives aimed at promoting EV adoption. Analysts predict that higher cumulative costs could discourage potential buyers, particularly those sensitive to total cost of ownership. Moreover, urban policies reducing EV discounts on congestion charges, such as in London, further increase operational expenses for EV drivers.
Projected Consequences for EV Sales and Emissions Targets
Industry studies estimate that the pay-per-mile tax could lead to around 440,000 fewer electric vehicle sales over the coming years. This reduction in uptake poses significant challenges to the UK’s climate targets, notably its commitment to achieve net zero carbon emissions by 2050. A slower EV transition delays reductions in tailpipe emissions and risks prolonging reliance on higher-polluting vehicles.
Broader Context and Policy Considerations
The UK’s shift toward electrification of transport has been driven by a combination of regulatory measures, financial incentives, and environmental urgency. While the pay-per-mile tax attempts to address fiscal shortfalls in the wake of declining fuel duty revenue, it introduces a potential conflict between fiscal and environmental objectives.
In considering the trade-offs, policymakers must weigh the need to maintain infrastructure funding against the risk of hampering the low-carbon vehicle transition. The challenge will be balancing taxation mechanisms to ensure sustainable investment in roads without disincentivising cleaner vehicle adoption.
As the policy is implemented, its effects on consumer behavior, vehicle market trends, and emissions outcomes will require close monitoring. The coming years will be critical in determining if the pay-per-mile tax hinders or complements the UK’s broader transport decarbonization strategy.