Pay-per-mile road tax – what is it, how will it work and what does it mean for you? 

In her November Autumn Budget, Chancellor of the Exchequer Rachel Reeves announced the introduction of pay-per-mile road charging for EV and plug-in hybrid drivers, a measure which is being implemented to claw back lost revenue from falling fuel duty as more people switch to electric cars.

Drivers of EVs will pay 3 pence per mile, while plug-in hybrid owners will be charged 1.5 pence per mile. This new system is currently in a consultation period while the finer details are worked out, and it’s set to be implemented in Spring 2028.

Remember, you can buy a brand new or used car right here on Carwow. And you can sell your car, too. We’re here to help you through every step of your car-changing journey.

Why is the government introducing pay-per-mile?

To put it simply, pay-per-mile road charging is being brought in to level the playing field between EV drivers and those who own petrol and diesel cars. Electric car drivers don’t pay fuel duty, and as more people switch to EVs this has resulted in a drop in revenue for the government.

You might be wondering why plug-in hybrid cars have been roped into this, and it’s because they are also capable of driving on electric power alone for a considerable distance. This means you’re still not paying fuel duty for those 30 or so miles you drive in EV mode, but you still do use fuel once your engine needs to kick in. This is why PHEVs are charged a lower rate per mile.

How much will pay-per-mile cost drivers?

If you drive an electric car, you’ll be charged 3 pence per mile. Say you cover 8,000 miles per year, that works out to £240. That’s still around half of what the average petrol car driver would pay in fuel duty for the same mileage, so electric car drivers still come out of this better off.

That is if you have a home charger of course, because you’ll have access to much cheaper charging rates. If you rely solely on the public charging network, this additional cost could make an EV less appealing.

Plug-in hybrid drivers will pay £120 per year to do 8,000 miles under the new scheme, so you’ll want to make sure you keep the battery topped up to get the best value from your car.

Enforcing pay-per-mile: will my car be fitted with a tracker?

In short, no. Pay-per-mile is still in a consultation period at the moment, so the government is talking with various agencies and liaising with the public to work out the best way of implementing it – however there are no plans to monitor people’s mileage using a black box or other tracking devices as this would be an invasion of privacy.

Instead, the plan is for the driver to estimate their mileage at the beginning of the year. You’ll then be charged based on this estimate, and your true mileage will be recorded at your yearly MOT test.

If your car is under three years old, and therefore doesn’t need an MOT test, you may need to attend a yearly mileage check appointment at your local garage to record your distance.

If you’ve driven fewer miles than you estimated, you may get credits towards next year’s tax. If you’ve driven further, you’ll have to pay the difference.

Have your say on pay-per-mile charging

There are lots of little details for the government to work out before it can enforce pay-per-mile charging, and you can have your say by taking part in the consultation. It’s open to the public until March 2026, and you can use it to raise any concerns, thoughts or ideas you may have.

Details like how to charge leasing customers, what happens when you drive abroad and the consequences of not reporting your mileage all need to be ironed out, and the consultation process will be used to figure out these processes.

Car change? Carwow!

Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.

Click here to follow us on WhatsApp, where you can keep up-to-date with all the latest news, reviews, advice guides and videos.