Electric vehicles (EVs) have become central to the UK’s vision for cleaner, cost-effective, and sustainable transport. However, as drivers shift from petrol and diesel to electric, a growing issue has emerged, the loss of fuel duty revenue that traditionally funds public services and infrastructure.
To address this, the government is considering a pay per mile tax for electric cars, expected to launch in 2028. This proposed system would charge drivers based on distance travelled, aiming to close the funding gap while maintaining fairness.
But what will it mean for EV owners, future buyers, and the UK’s green transition?
What Is the Pay Per Mile Tax for Electric Cars?
The pay per mile tax electric cars is a proposed levy that would charge EV drivers based on the total distance they travel each year. Unlike traditional fuel duty applied to petrol and diesel, this system links taxation directly to road usage rather than fuel consumption.
The goal is to close the growing gap in revenue as more drivers switch to electric vehicles, which currently avoid fuel-related taxes.
While petrol and diesel motorists help fund roads and public services through fuel duty, EV owners do not contribute in the same way.
This pay-per-mile approach mirrors the “cost-per-use” principle of fuel-based systems, ensuring fairness as the UK transitions toward cleaner transport.
Why Is the UK Government Proposing This Policy Now?
The introduction of a pay-per-mile tax on EVs stems from multiple fiscal and environmental pressures that the government can no longer ignore.
Loss of Fuel Duty Revenue
Fuel duty has historically been one of the government’s most reliable income streams. However, with the transition to electric vehicles, that revenue is projected to collapse.
Current estimates suggest that by 2040, the UK could face a shortfall of £12 billion annually due to diminished fuel duty contributions.
Pressure on Public Finances
The broader economic context is also relevant. The Office for Budget Responsibility has projected that government debt could reach 270% of GDP by the early 2070s if policy remains unchanged.
This long-term outlook has increased the urgency to stabilise public finances, prompting proposals such as the EV mileage tax.
Growth of EV Adoption in the UK
The EV market in the UK is growing at pace. As of 2025, battery electric vehicle registrations have increased by 28.9% year-on-year, and plug-in hybrid vehicles have grown by 37.1%, according to market data. With internal combustion engine (ICE) sales on the decline, the tax system must evolve accordingly.
How Will the Electric Vehicle Mileage Tax Work in Practice?
The electric vehicle mileage tax is expected to roll out in 2028, following a consultation period, introducing a 3p per mile charge for EV drivers.
This policy aims to ensure fair contribution from all motorists as fuel duty revenues decline with the rise of electric vehicles.
How the System Will Work?
- Annual Mileage Estimate: Drivers will estimate their yearly mileage and prepay the corresponding fee.
- Top-Ups and Adjustments: If actual mileage exceeds the estimate, a top-up will be required; unused miles will roll over as credit.
- No GPS Tracking: The system will rely on self-reporting, ensuring privacy but carrying some risk of inaccuracy.
- Hybrid Vehicle Rates: Hybrids will be charged at a lower rate, acknowledging partial fuel duty contributions.
Overall, this approach balances fairness, privacy, and practicality for the UK’s future road taxation.
What Could This Mean for EV Ownership Costs in the UK?
One of the most attractive aspects of owning an electric car has been the lower running costs compared to traditional petrol or diesel models. However, the pay per mile tax could begin to narrow that financial gap.
Journey Costs Under New EV Tax:
| Journey | Distance (miles) | Estimated Cost (at 3p/mile) |
| London to Edinburgh | 403 | £12.09 |
| London to Manchester | 211 | £6.33 |
| Bristol to Cambridge | 166 | £4.98 |
| Oxford to Cambridge | 100 | £3.00 |
| Cardiff to Newport | 12.4 | £0.37 |
Based on these estimates, average annual costs for EV drivers under this model could reach £250, still significantly less than the £600 average paid by petrol vehicle owners in fuel duty. However, it does dilute one of the primary financial incentives for switching to electric.
Will This Tax Undermine the Appeal of Owning an EV?
For many consumers, the long-term savings of EV ownership have been a decisive factor. The running cost advantage, including exemption from fuel duty and lower maintenance needs, positioned EVs as the more economical choice over time.
With this tax in place, the savings margin becomes slimmer. As an example, current electricity rates combined with the proposed 3p per mile tax raise the cost per mile closer to that of fuel-powered vehicles. According to existing calculations:
| Vehicle Type | Electricity/Fuel | Cost per Mile (approx.) |
| Petrol | Unleaded petrol | 9.9p |
| Electric (before tax) | Electricity only | 7.0p |
| Electric (with tax) | Electricity + tax | 10.0p |
Although still competitive, the perception of electric motoring as “cheap” may begin to erode, particularly for high-mileage drivers or those in rural areas.
What Has Been the Reaction from Politicians and Industry Leaders?
The proposal has generated sharp divisions, with strong voices on both sides. Some industry leaders argue this tax is premature and risks deterring EV adoption just when momentum is building.
Others claim the system lacks clarity and may unfairly penalise early adopters who bought EVs under the assumption of long-term tax benefits.
On the political front, there’s contention over whether this move supports or undermines the green agenda. Some view it as a necessary evolution of tax policy, while others label it a regressive “tax raid” during a cost-of-living crisis.
How Does the Government Justify a Pay Per Mile Tax on EVs?
The UK government’s proposed pay per mile tax on electric vehicles has sparked intense debate among drivers and policymakers alike. While many see it as a financial burden, the government argues it’s a necessary step toward fairness and fiscal balance.
The Fairness Argument
As EVs currently contribute far less in road taxes despite using the same infrastructure, the new policy aims to level the playing field. The government maintains that “every driver should contribute equally”, regardless of the car’s power source.
Fiscal Responsibility vs. Green Incentives
While the government continues to support the EV transition, through charging infrastructure rollouts and vehicle grants, it also stresses the need to balance environmental policy with revenue generation.
Over £4 billion has already been allocated in support of EVs, but maintaining public services and infrastructure requires broader funding.
Could This Lead to a Nationwide Road Pricing Model?
The proposed mileage tax could be the first step toward a comprehensive national road pricing system that affects all vehicle types.
Under current plans, the tax would integrate with the Vehicle Excise Duty (VED) framework, a system already familiar to UK drivers. The extended version, referred to informally as “VED+”, may serve as a prototype for more advanced distance-based charging mechanisms.
Though there is no official confirmation, the possibility of GPS-based monitoring or annual mileage reporting through MOT data could emerge as enforcement mechanisms in the long term.
What Are the Long-Term Implications for UK Electric Vehicle Policy?
The introduction of a pay-per-mile tax marks a major turning point in the UK’s electric vehicle policy, setting the tone for how future transport systems may evolve.
It represents the government’s move toward balancing environmental responsibility with financial sustainability, signalling that zero-emission driving will no longer remain tax-free forever.
- Encourages innovation in EV technology, fleet efficiency, and energy management.
- Ensures fairness by having all road users contribute to infrastructure funding.
However, the policy also carries risks. If implemented poorly, it could discourage EV adoption and slow progress toward the UK’s net-zero transport goals.
The key lies in maintaining balance, combining the new tax with strong incentives, expanded charging infrastructure, and smart transport systems. Done right, it could strengthen the UK’s leadership in sustainable, equitable mobility.
Conclusion
The proposed pay per mile tax electric cars marks a turning point in the UK’s approach to motoring and environmental policy. While it addresses legitimate fiscal concerns and seeks to create a fairer taxation system, it must be introduced with caution and foresight.
The challenge lies in balancing the need for revenue with the urgent goals of decarbonisation and sustainable transport. With the right adjustments and ongoing public dialogue, the pay per mile scheme could evolve into a fair and efficient model fit for the UK’s green future.
Frequently Asked Questions
Will EV owners need to install tracking devices for mileage monitoring?
No, the proposed system will not use GPS or tracking devices. Instead, drivers will estimate their mileage annually and adjust payments based on actual usage.
What happens if an EV driver underestimates their annual mileage?
Drivers who exceed their estimate will need to pay a top-up at the end of the year to cover the extra miles driven.
Are businesses with electric fleets affected by the new tax?
Yes, business fleet owners will also be subject to the pay-per-mile tax, potentially leading to higher operational costs depending on usage levels.
How will the pay-per-mile tax impact rural vs. urban EV users?
Rural drivers, who typically travel longer distances, may face higher annual charges compared to urban drivers who use their vehicles less frequently.
Could this tax discourage people from switching to electric cars?
It may reduce some of the cost-saving incentives, but EVs will still be cheaper to run overall than petrol or diesel vehicles.
Is there any financial support available to offset the new tax?
While no direct offset has been announced for this tax, government EV grants and charging infrastructure investment are expected to continue.
What other countries have implemented similar EV mileage taxes?
A few nations, including the US (in select states), have explored or piloted similar road usage charges for EVs, often using voluntary opt-in systems or pilot programs.
