UK pay-per-mile blow as Treasury issues new rule on some journeys | Personal Finance | Finance
The Government has given an update on pay-per-mile plans for motorists driving in the UK – and overseas. The government’s planned pay-per-mile tax, set to be introduced in 2028 was announced in the Autumn Budget, could see electric vehicle (EV) drivers paying an extra £267 per year based on current national mileage averages.
Under the current proposal, EV drivers would pay 3p per mile, while plug-in hybrid (PHEV) owners would pay 1.5p per mile. The proposed UK pay-per-mile road tax (known as eVED), set to begin in April 2028 for electric vehicles (EVs) and plug-in hybrids (PHEVs), will be measured primarily through a car’s odometer readings recorded at annual MOTs and check-ups.
But this has raised questions as to what exactly will count – and if a car is driven abroad, for example. In a new Parliamentary written question Tory MP Nick Timothy asked Chancellor Rachel Reeves: “How the assessment for electric Vehicle Excise Duty will differentiate between (a) domestic and (b) overseas mileage for (i) electric vehicles and (ii) plug-in hybrids.”
In answer Exchequer Secretary to the Treasury, Dan Tomlinson confirmed the rule that it would not matter where a car was driven. He said: “As announced at Budget 2025, the Government is introducing Electric Vehicle Excise Duty (eVED) from April 2028, a new mileage charge for electric and plug-in hybrid cars, recognising that EVs (electric vehicles) contribute to congestion and wear and tear on the roads but pay no equivalent to fuel duty. The taxation of motoring is a critical source of funding for public services and investment in infrastructure.
“The Government has ruled out charging tax based on when or where people drive to protect motorists’ privacy. This means non-UK mileage driven by UK registered cars will fall into scope of eVED, as with fuel duty, which does not vary by basis of where a car is driven.
“The vast majority of eVED will be paid on travel in the UK; there were an estimated 225 billion car miles in Great Britain in 2024, and over nine billion miles travelled by car in Northern Ireland in 2023.”
The Treasury faces a reduction in revenue from fuel duty as more drivers move from petrol or diesel cars to EVs. The Office for Budget Responsibility (OBR) has forecast fuel duty receipts will decline to around half of current levels in the 2030s in real terms, to about £12 billion per year.
In response, Chancellor Rachel Reeves announced that from April 2028, drivers of battery electric cars will be hit by a 3p per mile tax, while drivers of plug-in hybrids will be charged 1.5p per mile. She said announcing the plan: “Because all cars contribute to wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just the type of car they own.”
The new tax has been named electric vehicle excise duty (eVED) and is to be paid each year alongside the existing vehicle excise duty VED). The rate will increase annually in line with the CPI measure of inflation.
The Treasury said in April 2028, an average EV driver will pay about £240 per year. It added that the tax paid by EV drivers will be “around half the fuel duty rate paid by the average petrol/diesel driver”.
A Treasury consultation document revealed that for eVED, drivers of electric cars will be required to estimate their mileage for the year and either pay upfront or spread their payment across the year.
This will happen when they pay VED. Drivers will submit their actual mileage at the end of the year, and either make an extra payment or receive a credit for future use as required.
Motorists will have their mileage checked annually. This will be during their MOT for most cars.
But as new cars do not have an MOT until they are three years old, they will be checked at about the first and second year anniversary of their registration.
The document stated that the Government has ruled out charging tax based on when or where people drive to “protect motorists’ privacy”.
This means mileage driven overseas by UK-registered cars will fall into the scope of eVED.
Ginny Buckley, the chief executive of EV advice website Electrifying.com, described the Government’s approach to the EV transition at the time as “muddled and confusing”, by offering purchase grants but “piling new taxes” on those who have already switched from petrol or diesel models.
