Posted on 10 Nov 2025
The UK government is reportedly considering a new pay-per-mile tax for electric vehicles, in a bid to offset lost revenue from fuel taxes, Kallanish reports.
According to the Daily Telegraph, chancellor Rachel Reeves is holding “conversations” on the matter and is expected to announce the new road charge at her upcoming Budget. All-electric car drivers could be charged 3 pence per mile on top of other road taxes, with hybrids charged at a lower rate.
The idea could see the proposed EV charges introduced from 2028 following a public consultation, targeting a potential £1.8 billion ($2.35 billion) a year for the Treasury by the early 2030s.
Citing people briefed on the government’s plans, the Financial Times said the average EV driver would pay an extra £250 a year, compared to how the average owner of a petrol or diesel car pays about £600 in fuel duty.
“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers whilst backing the transition to electric vehicles,” a government spokesperson tells Kallanish, without confirming or denying the 3p pay-per-mile plan.
“Just as it is right to seek a tax system that fairly funds roads, infrastructure and public services, we will look at further support measures to make owning electric vehicles more convenient and more affordable,” the spokesperson adds.
The government notes it has invested £4 billion in support, including grants to cut upfront costs by up to £3,750 per eligible vehicle.
Tanya Sinclair, chief executive of trade body Electric Vehicles UK, says there’s no doubt the system needs “fundamental reform,” as today’s vehicle parc looks nothing like it did when emissions-based vehicle excise duty (VED) was introduced.
“The real question is how. Government must take the time to consult properly, design carefully and communicate transparently, a process that will take years, not months,” she adds. “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.”
David Martell, chief executive of UK-based EV charger maker Andersen, agrees that it would be “unfortunate” if the government introduced a pay-per-mile tax without careful consideration. “A rushed or poorly designed scheme risks undermining confidence in electric vehicles at a crucial time. Drivers who’ve invested in EVs and home charging, often at significant cost, need stability and clarity, not uncertainty about how they’ll be taxed in future,” he tells Kallanish.
“EV drivers should pay, but it should come at the right level and the right time. Now would be far too soon – EVs represent only 4% of cars on our roads and a tax would raise a minimal amount until this number is bigger,” warns James Court, head of policy at Octopus Electric Vehicles.
Industry stakeholders’ consensus is that a change in road tax will eventually be needed, but introducing it now would stifle the growth seen over the past years. “What is needed is a considered plan for the best and fairest way for all road users to handle the change in vehicle mix over time,” adds Court.
Electric vehicles, including all-electric, plug-in hybrids and hybrids, accounted for 50.8% of the new UK car market in October. Year-to-date, all-electric car registrations are up 28.9%, according to automotive trade body SMMT.
The group has warned that planned tax policy changes, such as the end of Employee Car Ownership Schemes (ECOS), could deliver a major blow to the industry and result in over £1 billion in lost revenue, risking 5,000 manufacturing jobs.
Source:Kallanish
