Government takes next step towards pay-per-mile tax for EV drivers

The government has confirmed it’s pressing ahead with plans to introduce a new pay-per-mile tax for electric cars from April 2028, marking one of the biggest changes to motoring taxes since the transition to electric cars began.

The new Electric Vehicle Excise Duty (eVED) system will see drivers pay a mileage-based charge alongside the current road tax system, replacing some of the fuel duty revenue lost as more motorists switch from petrol and diesel cars.

Following a public consultation that attracted more than 5,000 responses, ministers have also confirmed several changes designed to make the scheme simpler for drivers and businesses.

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How will the new pay-per-mile tax work?

Rather than using GPS tracking or telematics, drivers will be asked to submit an annual odometer reading when renewing their vehicle tax.

The government says this approach protects motorists’ privacy by recording only how many miles a car has travelled – not where, when or how those journeys were made.

The scheme is expected to apply to both fully electric cars and most plug-in hybrid models, while electric vans will remain exempt.

The mileage charge is expected to be set at around half the equivalent fuel duty paid by petrol drivers: 3p per mile for EVs and 1.5p per mile for plug-in hybrids. The government estimates the new tax will raise around £1.2bn a year.

What changed after the consultation?

The consultation highlighted concerns about additional bureaucracy, particularly for newer vehicles and company fleets.

In response, the government has made several significant changes:

• New EVs under three years old will not require extra mileage inspections before their first MOT.
• Fleet operators and leasing companies will have simplified reporting rules.
• Businesses will be able to use estimated mileage in some circumstances.
• Bulk licensing arrangements and more flexible payment options will also be introduced.

The government says these changes will make the system “fair, proportionate and sustainable” while reducing unnecessary administration.

What is means for electric car owners

Although the final legislation is still to be introduced, the consultation response gives motorists a much clearer idea of what to expect.

Running an EV will become more expensive

One of the biggest financial advantages of owning an electric car has been its lower day-to-day taxation compared with petrol and diesel vehicles.

From 2028, that gap will narrow as drivers begin paying a mileage-based charge.

However, the government insists electric cars should still remain cheaper to run overall than equivalent petrol or diesel cars.

Annual paperwork will increase

For many drivers, renewing VED is currently a simple process.

Under the new system, you’ll also need to provide an annual odometer reading, adding another step to the renewal process.

Used EV buyers should play closer attention

Mileage records are set to become even more important when buying or selling a used electric car.

The government says ownership changes will need to be reflected accurately so the correct driver pays for the miles they have covered.

Keeping copies of mileage records at the point of sale could help avoid disputes later.

Incorrect mileage could lead to penalties

The consultation response also outlines enforcement measures for motorists who fail to submit mileage readings or deliberately provide incorrect information.

While intended to prevent fraud, you should expect penalties for inaccurate declarations.

What isn’t changing?

One of the biggest concerns raised during the consultation was whether the government would introduce vehicle tracking. This has now been ruled out.

The new system will not include:

• GPS tracking of journeys
• Charges based on where or when you drive
• A nationwide road-pricing scheme
• A permanently connected device installed in your vehicle

Instead, the preferred system relies solely on annual odometer readings.

Industry welcomes changes – but concerns remain

Industry bodies have broadly welcomed the government’s decision to simplify the scheme, but have raised some questions.

Electric Vehicles UK chief executive Tanya Sinclair said removing mandatory mileage checks for cars under three years old eliminates an unnecessary burden for both private motorists and fleet operators, while calling for clearer communication around the Government’s wider EV strategy.

Meanwhile, BVRLA chief executive Toby Poston said ministers had “taken some of the roughest edges off” the proposals by recognising the needs of fleet operators. However, he warned that increasing the cost of owning an electric car could make the UK’s transition to zero-emission motoring more difficult.

Vicky Edmonds, CEO of association EVA England, said the policy doesn’t work for drivers.

She explained: “The government has made one welcome change for newer EVs, but the wider scheme remains too complex, risks leaving people out of pocket and fails to give drivers the confidence they need.

“At such a crucial point in the switch to electric, ministers should be making the system simpler, fairer and easier to understand, not pressing ahead with a policy whose key faults remain unresolved. This now piles pressure on the public charging review that must pave the way for affordable charging, or this transition simply won’t work for drivers.”

What happens next?

The pay-per-mile tax is scheduled to begin in April 2028, although further legislation and detailed guidance will be published before then.

For millions of current and future electric car owners, the biggest change will simply be remembering to submit an annual mileage reading when renewing their vehicle tax.

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