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Pay-per-mile tax for EVs considered in budget

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November 7, 2025
3 min read

Pay-per-mile tax for EVs considered in budget

Drivers of electric vehicles (EVs) could face a pay-per-mile tax on top of other road taxes to offset the lost revenue from petrol and diesel cars. Chancellor Rachel Reeves is considering using the next budget to announce the plans that would cost EV owners an additional £250 annually on average.

The proposals would mean that drivers of EVs would pay 3p per mile on top of other road taxes. Until April this year, EVs were exempt from vehicle excise duty (VED), sometimes referred to as road tax.

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“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles,” A government spokesperson said. “We want a fairer system for all drivers.” The chancellor is expected to argue that this would be fairer as those who drive petrol or diesel cars are currently paying £600 a year annually in fuel duty.

The additional revenue, according to The Guardian, would allow Reeves to “plug a financial hole of between £20 billion and £30 billion by the end of the parliament.”

The new pay-per-mile scheme would not come in before 2028 after a consultation, The Daily Telegraph reported. By then, it is expected that around 4 million people could be driving EVs, according to the Society of Motor Manufacturers and Traders (SMMT).

The trade body has criticised the pay-per-mile scheme. “We recognise the need for a new approach to motoring taxes but at such a pivotal moment in the UK’s EV transition, this would be entirely the wrong measure at the wrong time,” the SMMT said. “A smarter, fair and future-ready taxation system requires a fundamental rethink – one that must done in full partnership with the industry.”

Reeves was urged last year by the Campaign for Better Transport to introduce the system to fill a growing revenue gap from the move away from petrol and diesel cars.

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