London, November 30, 2025
The UK government has introduced a pay-per-mile tax for electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), starting in April 2028, to address declining fuel duty revenues and ensure fair contribution to road maintenance. The new charges will be applied alongside existing taxes and vary by vehicle type.
Details of the New Tax Scheme
From April 2028, all electric vehicle owners in the UK will be required to pay a mileage-based tax designed to compensate for reduced fuel duty income as more drivers switch to electric-powered transport. Fully electric vehicles will incur a charge of 3 pence per mile driven, while plug-in hybrids will pay 1.5 pence per mile. This tax will be levied in addition to the current Vehicle Excise Duty (VED), meaning owners must budget for both payments.
Purpose and Significance
The government has framed this tax as a necessary measure to maintain fairness in road usage funding. As conventional fuel consumption declines due to increasing EV adoption, revenue from fuel duty—the traditional source of road maintenance funding—is expected to drop significantly. By charging based on actual miles driven, authorities aim to ensure all vehicle users contribute equitably to infrastructure upkeep.
Inclusion of Plug-in Hybrids and Impact on Luxury Vehicles
Significantly, plug-in hybrids, which previously benefited from reduced or exempt tax status, will now be subject to this mileage tax. This move closes a tax loophole and aligns PHEVs with the broader goal of equitable road funding. Moreover, the threshold for the Luxury Car Tax, known formally as the Expensive Vehicle Supplement, has been increased to £50,000 for electric vehicles. Consequently, owners of higher-priced EVs will face increased annual charges, emphasizing government intent to balance incentives with revenue.
Operational Mechanics
The tax collection process will incorporate an estimated mileage declaration at the time of vehicle taxation renewal. Drivers will report their anticipated annual mileage, and payments will be adjusted based on actual travel data collected subsequently. For example, an electric vehicle owner estimating 10,000 miles per year would face an additional tax liability of approximately £300 annually under this scheme.
Global Context and Trends
The UK’s adoption of a pay-per-mile tax follows a broader international trend, particularly observable in parts of the United States, where several states are testing or implementing mileage-based fees. These programs respond similarly to declines in gas tax revenues and represent an emerging framework for sustainable transportation funding as vehicle fleets become increasingly electrified.
Looking Ahead
The tax is slated for introduction in 2028, affording motorists and businesses time to prepare for the new system. Government officials have cautioned, however, that per-mile rates might increase over time, potentially reflecting inflation and evolving fiscal needs. This signals a long-term structural change in how road use is funded, underpinning efforts to adapt to the transition away from fossil fuels.
As the UK advances its transportation policies to match technological and environmental shifts, electric vehicle owners can expect growing financial responsibilities tied to their mileage. The new tax represents a fundamental shift in vehicle taxation policies, emphasizing continual adaptation in response to changing revenue sources and infrastructure funding challenges.