EV drivers could face a new 3p per mile tax as early as 2028, according to reports suggesting Chancellor Rachel Reeves will announce the measure in this year’s Budget.
The Telegraph reports Rachel Reeves is considering the levy for her November 26 Budget speech. The scheme would follow a consultation period before taking effect.
A government spokesperson confirmed to the BBC that officials are exploring ways to create a fairer system for all drivers.
The move addresses a growing Treasury problem – declining fuel duty income as more drivers switch to electric cars.
The Revenue Gap
Current fuel duty brings in around £25 billion annually from the 52.95p-per-litre tax on petrol and diesel. Treasury estimates show this could drop by £12 billion per year by 2040 as EV adoption accelerates.
“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles,” the government spokesperson told the BBC. “We want a fairer system for all drivers.”
The proposed tax would generate approximately £1.8 billion per year by 2031 and cost the average EV driver an extra £250 annually.
This comes after EVs lost their vehicle excise duty exemption this year, adding £195 to most EV drivers’ annual tax bills.
How It Would Work
Under the rumored system, drivers would estimate their annual mileage and pay the 3p-per-mile charge when they tax their vehicle.
Excess mileage would carry over to the following year if drivers travel less than estimated. Those exceeding their estimate would pay the outstanding amount.
Officials favor this approach over previously discussed electronic tracking methods. It’s unclear how drivers would verify their actual annual mileage.
Industry Pushback
Tanya Sinclair, CEO of lobby group Electric Vehicles UK, said the current vehicle tax system needs reform but urged careful implementation.
“Pay-per-mile road pricing has resurfaced many times, and with reason,” Sinclair told EV Powered. “Today’s vehicle parc looks nothing like it did when emissions-based VED was introduced.”
She emphasized the need for proper consultation and careful design – a process requiring years, not months.
“In the meantime, it should stop fuelling speculation. Rumours about pay-per-mile only unsettle drivers and risk slowing the very market we need to grow.”
Ginny Buckley, chief executive of EV advice site Electrifying, criticized the mixed messaging from government.
“Drivers are being encouraged to go electric, then hit with the threat of new taxes,” she said. “You can’t drive the EV transition with one foot on the accelerator and the other on the brake.”
Buckley highlighted how the tax would particularly impact drivers without home charging access, who already pay more per mile using public chargers.
She called for fuel duty to rise with inflation – frozen for over 14 years – to maintain fairness during the transition.
Melanie Lane, Chief Executive at charging provider Pod, echoed concerns about policy contradictions.
“Yesterday’s EV registration figures showed positive momentum and a clear signal that investment and incentives are working,” Lane commented. “We urged government to reward, not punish, those making the switch.”
The government maintains its support for EV adoption despite the proposed tax.
“We want a fairer system for all drivers whilst backing the transition to electric vehicles,” the spokesperson said. “We will look at further support measures to make owning electric vehicles more convenient and more affordable.”
