In the November 2025 Budget, the UK government confirmed plans to introduce a new mileage-based road tax for electric vehicles (EVs) and plug-in hybrids. How will it work and what does it mean for electric vehicle owners? We take a closer look.

From April 2028, battery-electric cars will be taxed 3 pence per mile travelled. Whilst plug-in hybrid vehicles will pay a lower rate, 1.5 pence per mile, reflecting their partial use of petrol/diesel.

This new ‘Pay-Per-Mile’ tax is on top of the existing annual road tax which from April 2025 now applies to EVs as standard. Road tax also includes a supplement for high value cars, the so-called ‘expensive car supplement’. In the budget, the Chancellor announced the threshold for a new electric car would to pay the supplement would be increased from £40,000 to £50,000 (no change for petrol/diesel vehicles).

Why is the government doing this?

As more drivers switch from petrol and diesel to electric vehicles, the government faces falling revenue from traditional fuel duty, a major source of funding for roads, infrastructure and public services.

In effect, the pay-per-mile tax is the government’s way of rebalancing revenue, ensuring all road users contribute fairly, regardless of whether they fill up with fuel, or charge at home.

What will the ‘Pay-Per-Mile’ tax cost EV drivers?

Here’s a breakdown using typical usage as an example:

The average electric vehicle driver in the UK logs about 8,500 miles per year. Under the new scheme, at 3p/mile, that equates to an additional cost of £255 per year.

For plug-in hybrid owners, the tax will be 1.5p/mile (reflecting that they also buy fuel), which equates to an additional cost of £127.50 annually (on the same mileage).

Because the charge is per-mile, costs will scale with usage, those who drive less will pay less, those who drive a lot will see bigger bills.

Over the next few years, the government expects the new tax to generate significant revenue - starting at around £1.1 billion in 2028–29 and rising in subsequent years.

However, and this is an important point, the pay-per-mile tax will still be significantly less than fuel duty paid on petrol and diesel cars. The current rate of fuel duty is 52.95 pence per litre (excluding VAT). This is set to rise by 5p per litre in September 2026. Meaning, if you accept that on average a litre of fuel lasts roughly 10 miles, a driver of a petrol or diesel car driving 8,500 miles a year will clock up an impressive fuel duty cost of £450 (that’s at today’s rates).

How will the mileage be calculated and how will you be charged?

While the government hasn’t yet set out the full technical framework, the Budget documents and OBR briefing outline the expected method for calculation, which is designed to avoid complex tracking or privacy concerns.

Here’s what is currently being discussed for how the scheme will work.

Annual odometer (mileage) checks

The most likely mechanism is a once-a-year odometer reading, similar to how MOTs record mileage today. This could be done via:

• Your annual MOT
• A servicing appointment
• A digital self-report (with photographic evidence of the dashboard)
• Potential integration with connected-car systems for newer vehicles

The government wants a simple, low-administration solution, and relying on existing MOT infrastructure is the easiest route.

Mileage-based bill generated automatically

After your annual mileage is recorded (e.g. via MOT), a bill would be generated automatically using: Total miles driven x 3p (EV) or 1.5p (PHEV)

Example: 8,500 miles × 3p = £255 a year

You’ll pay at the same time as road tax (VED)

The charge is expected to sit alongside your annual VED renewal, so motorists only have one payment, not multiple bills throughout the year.

No GPS tracking, no black boxes

The Treasury has been clear that this system will not rely on GPS tracking or live monitoring of driving behaviour. This will reassure many drivers worried about “surveillance-style” road pricing.

What does this mean for you?

The move has drawn sharp criticism from many in the automotive and EV sectors, who warn it could slow down the shift away from petrol/diesel cars.

If you’re already an EV owner or considering a move to electric or hybrid vehicles, the total cost of ownership will go up with the introduction of the ‘Pay-Per-Mile’ tax in April 2028 by around £200-£300 a year, depending on your mileage. Costs that were once partly offset by fuel savings may now be substantially eroded, especially for high-mileage drivers.

However, if you generally drive a low annual mileage the extra cost may be modest, making EVs still a viable option.

Final Thoughts

The government argues the tax will help make the whole system more equitable. As the shift towards EVs continues, the government needs to prevent a collapse in road-tax income – funds that are used to maintain our roads and public highways infrastructure.

The new EV pay-per-mile tax reflects a tension: on one side, the government needs to replace lost fuel-duty revenue and ensure fairness among all drivers. On the other, the UK has ambitious climate and net-zero goals that depend on encouraging EV adoption.

Whether this measure represents a pragmatic long-term solution, or a policy that risks stalling the shift to zero-emission transport, depends largely on how it’s implemented, and whether broader EV incentives (subsidies, charging infrastructure, lower purchase costs) remain strong.

For now, the message to drivers is clear: EVs are no longer “free from tax.” If you’re planning a switch, factor in the full cost.

Thinking about switching to an EV?

At Thame Cars, we stock a wide range of electric and plug-in hybrid vehicles to suit different budgets, lifestyles and mileages. Our team is always happy to talk you through the costs, benefits and practical considerations of making the switch, including how the new pay-per-mile tax might affect you personally.

If you’d like friendly, no-pressure advice, pop in or give us a call - we’re here to help you find the right car for your needs.