A new way of taxing drivers is on the horizon, but there’s no need to panic just yet.
The UK government is planning to introduce a pay-per-mile road tax for both electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs). The key detail, however, is timing. It’s not expected to come into force until spring 2028, giving drivers and businesses a decent window to prepare.
This new system, often referred to as Electric Vehicle Excise Duty (eVED), shifts the way drivers are taxed. Instead of paying based on fuel consumption, you’ll pay based on how far you actually drive. Since EVs don’t currently contribute to fuel duty in the same way petrol and diesel cars do, the move is designed to rebalance things. PHEVs are included as well, largely because they can cover a significant number of miles using electric power alone.
From April 2028, drivers will be charged relatively modest rates around 3p per mile for fully electric vehicles and 1.5p per mile for plug-in hybrids. To put that into perspective, someone driving the UK average of roughly 8,000 miles per year would pay about £240 annually in an EV, or £120 in a PHEV.
Even with this added cost, electric driving still comes out cheaper overall. Fuel duty currently sits at 52.95p per litre, and when you apply that to typical annual mileage, petrol drivers might spend around £535 a year on fuel duty, while diesel drivers could be paying closer to £448. With fuel prices expected to rise over time, the cost gap is unlikely to close anytime soon.
Working out your own cost under the new system is fairly straightforward. You simply multiply your annual mileage by the relevant rate. For example, driving 17,000 miles a year in an EV would come to about £510 annually. On a smaller scale, even longer journeys remain relatively inexpensive, driving from London to Glasgow, for instance, would cost just over £12 in pay-per-mile charges.
So why introduce it at all? The answer is largely down to falling fuel tax revenues. As more drivers switch to electric vehicles, the government collects less from traditional fuel duty. A distance-based charge helps make up that shortfall while ensuring all drivers contribute in a similar way.
It’s worth noting that this new charge won’t replace existing road tax. Standard Vehicle Excise Duty (VED) will still apply, meaning EV drivers will effectively have an additional cost rather than a substitute one. Petrol and diesel vehicles, on the other hand, are unlikely to be brought into this system, since fuel duty already acts as a kind of pay-per-mile tax.
There will be some initial exceptions. Electric vans, buses, motorcycles and HGVs are expected to be exempt when the system launches, although that could change over time.
For drivers considering leasing, whether personally or as part of a business fleet, this is another factor to keep in mind. Higher mileage will naturally mean higher costs, so estimating your annual usage becomes more important than ever. Some drivers may even opt for lower mileage agreements or rethink shorter trips altogether. That said, electric vehicles are still likely to remain the more cost-effective option compared to petrol or diesel alternatives.
As for how the system will actually work, the details are still being finalised. One likely approach is a pre-pay model, where drivers estimate their yearly mileage, pay upfront, and then have their actual usage checked at their MOT. Any difference would then be refunded or charged accordingly. Importantly, there are currently no plans to introduce tracking devices or black boxes, so privacy concerns should be minimal.
There’s also a chance that, for leased vehicles, the cost could be bundled into monthly payments similar to how road tax is often handled now, though that hasn’t been fully confirmed.
In the end, while the idea of a new tax is never particularly welcome, the real-world impact looks fairly manageable. Even after pay-per-mile charges are introduced, EVs and PHEVs are still expected to be cheaper to run for most drivers. And with a few years still to go before it comes into effect, there’s plenty of time to factor it into your plans.