The UK government has announced a major change to how electric and plug-in hybrid vehicles are taxed, introducing a new pay-per-mile road charge as part of the latest Budget. The move marks a significant shift in transport policy as the country prepares for a future dominated by electric vehicles and the gradual phase-out of petrol and diesel cars.
The new charge reflects a growing challenge for the government: as more drivers switch to electric vehicles, revenue from fuel duty is falling. Fuel duty has long been one of the biggest sources of funding for road maintenance and transport infrastructure, and electric vehicles do not currently contribute to it. The new system is intended to create what ministers describe as a “fairer system for all drivers”.
How the pay-per-mile charge will work
From April 2028, drivers of fully electric vehicles will pay a road charge of 3 pence per mile, while drivers of plug-in hybrid vehicles will pay 1.5 pence per mile. These rates will rise each year in line with inflation.
Mileage will be recorded annually, usually during an MOT test, and the charge will apply to all UK-registered electric and plug-in hybrid vehicles. The new system will be integrated into the existing Vehicle Excise Duty framework, rather than replacing it. A government consultation is currently under way to determine the final details of how the scheme will operate.
To put the cost into context, an electric car driver covering around 8,500 miles per year would pay approximately £255 annually under the new system. This is estimated to be about half the per-mile tax cost currently paid by petrol and diesel drivers through fuel duty.
The government expects the policy to raise around £1.1 billion in the 2028–29 financial year, increasing to roughly £1.9 billion by 2030–31 as electric vehicle adoption continues to grow.
Other taxes electric vehicle drivers already face
The pay-per-mile charge is not the only recent change affecting electric vehicle owners. From 1 April 2025, electric vehicles became subject to Vehicle Excise Duty for the first time.
For brand-new electric cars, the first-year payment is £10, rising to the standard rate of £195 from the second year. Vehicles registered between April 2017 and March 2025 pay the standard £195 rate from the start.
Electric cars registered on or after 1 April 2025 with a list price above £40,000 are also subject to the so-called “luxury car tax”, which adds £425 per year. From April 2026, the price threshold for this additional charge will increase to £50,000.
In addition, electric vehicle drivers in London will have to pay the congestion charge from 2026, ending the long-standing exemption that EVs previously enjoyed.
Why petrol and diesel cars are being phased out
The new tax measures sit alongside a wider transformation of the UK car market. The government has committed to banning the sale of new petrol and diesel cars from 2030 as part of its legally binding goal to reach net zero emissions by 2050.
Net zero means ensuring that the UK does not emit more greenhouse gases than it removes from the atmosphere. Domestic transport, including cars, buses, and trains, accounted for more than a quarter of total UK emissions in 2023, making it the country’s largest emitting sector.
From 2030, all new cars sold in the UK must be electric or plug-in hybrid. New hybrid vehicles will continue to be sold until 2035, after which fully electric models are expected to dominate the market. The European Union has set a similar deadline, banning new fossil fuel car sales from 2035.
How many electric cars are on UK roads
Electric vehicle adoption in the UK has accelerated rapidly in recent years. Last year, 473,340 new fully electric cars were registered, up from 381,970 the year before. That represented 23.4% of the total new car market, meaning nearly one in four new cars sold was fully electric.
The government aims to increase that share to 80% by 2030 through increasingly strict targets for manufacturers. This year, for example, carmakers are expected to ensure that 33% of the vehicles they sell are zero-emission, although there is some flexibility in the rules.
Analysis by Zapmap suggests there are now more than 1.8 million fully electric cars on UK roads, out of a total vehicle fleet of around 34 million.
Most new electric cars are still bought by businesses and fleet operators. Around 75% of new EVs sold last year went to companies, with only one in four purchased by private buyers. Analysts attribute this trend to generous company car tax incentives and salary sacrifice schemes, which make electric vehicles particularly attractive to employers and employees.
The second-hand electric car market is also growing, although it remains relatively small. Data from the Society of Motor Manufacturers and Traders shows that around 80,600 used electric cars were sold between July and September, accounting for about 4% of all second-hand car sales.
Cars with internal combustion engines still make up the vast majority of vehicles on the road, and drivers will continue to be able to use petrol and diesel cars well beyond 2035.
How much electric cars cost to buy and run
To support the transition to electric vehicles, the government introduced the Electric Car Grant scheme in July. The scheme offers grants of up to £3,750 for eligible electric models priced at £37,000 or below. It launched with £650 million in funding, with an additional £1.3 billion announced in the Budget.
The Transport Secretary said subsidising electric vehicle sales would support economic growth and protect high-quality manufacturing jobs in the UK.
Motoring organisations such as the AA have warned that the upfront cost of new electric vehicles remains a major barrier for many drivers. However, the used market is beginning to offer more affordable options. Autotrader reports that in the three-to-five-year age bracket, many electric cars are now priced at or below comparable petrol models.
Leasing has also become a popular route into electric vehicle ownership. The British Vehicle and Leasing Association estimates that around 680,800 electric cars are currently leased, representing nearly half of all vehicle leases in the UK.
Charging costs and running expenses
Running costs for electric vehicles can be lower than for petrol or diesel cars, but the savings depend heavily on how and where the vehicle is charged.
Charging at home is generally the cheapest option, especially for drivers on off-peak electricity tariffs. Home charging benefits from the reduced 5% VAT rate on domestic energy, compared with the standard 20% VAT applied to public charging.
Public charging costs vary widely depending on the speed of the charger and the time of day. Rapid and ultra-rapid chargers, particularly on motorways, can be significantly more expensive and in some cases may cost more per mile than petrol or diesel fuel. Data from RAC shows that ultra-rapid charging costs have risen sharply since 2021.
Despite this, motoring groups generally agree that electric cars are cheaper to maintain overall, with fewer moving parts and lower servicing requirements than internal combustion vehicles.
Is the UK ready with charging infrastructure?
The UK’s charging network has expanded rapidly, but concerns remain about availability and regional inequality. Zapmap data shows there are nearly 87,000 public charge points across about 44,000 locations, including supermarkets, car parks, and lamppost chargers.
The government has pledged an additional £200 million to accelerate the rollout of new charge points. However, a recent report from the Public Accounts Committee warned that motorway charging remains “patchy” and that too many chargers are concentrated in London and the South East, which currently account for 43% of all public charge points.
Government figures show that more than 28,000 home charging sockets have been installed since April 2022 under the Electric Vehicle Chargepoint Grant scheme, alongside almost 14,000 public on-street chargers installed since 2017.
What the new charge means for drivers
The new pay-per-mile charge signals a clear shift in how road use will be funded in the electric age. While electric vehicles will remain cheaper to tax per mile than petrol and diesel cars, the era of near-zero road taxation for EVs is coming to an end.
For drivers considering the switch to electric, the overall cost picture will increasingly depend on mileage, charging habits, and vehicle price. As the UK moves closer to the 2030 petrol and diesel ban, these changes underline the government’s intention to balance environmental goals with the need to fund transport infrastructure in a rapidly changing automotive landscape.
