The era of tax-free motoring for electric vehicle owners in the UK is coming to an end. In the latest Budget, the Chancellor announced a significant shake-up to how drivers will be taxed, introducing a pay-per-mile road charge specifically for electric and hybrid vehicles starting in April 2028.
Whether you already drive an EV or are planning to switch before the 2030 petrol ban, here is everything you need to know about the new system.
The new measures are designed to ensure electric drivers contribute to the upkeep of the roads as fuel duty revenue declines. The rates announced are:
– Electric Vehicles: 3p per mile
– Plug-in Hybrids: 1.5p per mile
These rates will increase annually in line with inflation.
According to the Treasury, an electric car driver covering 8,500 miles a year can expect to pay around £255.
The Office for Budget Responsibility (OBR) highlights that this is still roughly half the fuel duty rate currently paid by petrol car drivers. However, the OBR has also warned that this new lifetime cost could dampen demand, potentially resulting in 440,000 fewer electric car sales.
To incentivise buyers, the Government has committed an extra £1.3 billion to extend the Electric Car Grant until 2030, as well as £200 million for improving charging infrastructure.
While the EV tax grabbed the headlines, there were other notable changes in the Budget for petrol and luxury car owners:
Fuel Duty
– The 5p cut in fuel duty has been extended until September next year.
– After that date, fuel duty is set to increase annually by the RPI measure of inflation.
Luxury Car Tax (VED)
Changes are coming to the “luxury car” supplement within the Vehicle Excise Duty system:
– New Threshold: The price threshold for this tax will rise from £40,000 to £50,000.
– New Rate: From April 2026, the annual surcharge for vehicles over this price will rise from £425 to £440.
