Pay-per-mile road tax: what it is and what it means for you

In her November Autumn Budget, Chancellor of the Exchequer Rachel Reeves announced that electric and plug-in hybrid drivers will soon pay road tax based on the miles they drive, as the government looks to recover lost fuel duty revenue.

EV drivers are expected to pay 3p per mile, while plug-in hybrid owners will be charged 1.5p per mile. The consultation on the new system has now closed, and the finer details will be revealed in due course ahead of its planned rollout in Spring 2028.

Here’s everything you need to know about the pay-per-mile road tax.

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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.

Could tax cuts to EV charging offset the costs of pay-per-mile?

Yes, tax cuts could help, but the impact depends on how you charge and how far you drive. The government is considering cutting VAT on public EV charging from 20% to 5%, making public chargers much cheaper. Public charging currently costs around 54p per kWh, compared to 8p per kWh at home, so savings could be significant for drivers without home chargers.

Cheaper public charging would offset some pay-per-mile costs, but not all – especially for those who drive a lot or rely mainly on public chargers. Options like installing chargers outside your home exist but aren’t practical for everyone, such as people with shared parking at flats.

In short, tax cuts would make EVs more affordable for many drivers, but they won’t fully eliminate the cost of the new road tax.

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