Rachel Reeves is exploring the potential implementation of a pay-per-mile tax specifically for electric vehicles (EVs), with plans to announce details in the upcoming budget on November 26. The proposed charge would be set at 3 pence per mile, adding an estimated £250 per year to the average expense for EV drivers. This initiative aims to address the decline in revenue from traditional petrol and diesel vehicles as more drivers transition to electric options.
A government spokesperson highlighted that while fuel duty applies to petrol and diesel vehicles, no equivalent system currently exists for electric cars. This move is presented as a means to create a more equitable taxation framework for all drivers. The chancellor may argue that implementing this EV levy would level the playing field, noting that petrol and diesel vehicle owners currently pay an average of £600 annually in fuel duty. The proposal is also designed to help address a projected fiscal deficit of between £20 billion to £30 billion by the end of the parliamentary term.
The plan, which is set to begin in 2028 following consultations, comes as the number of registered electric cars and vans in the UK is expected to reach around 6 million by that time. Current estimates indicate there are already over 1.3 million electric vehicles on the road in the UK.
In light of the anticipated pay-per-mile charge, a significant portion of the UK population may be considering “black box” car insurance, which monitors driving behavior to potentially lower costs. Notably, middle-aged drivers appear to be the most inclined towards telematics insurance options.
The government has reportedly invested £4 billion in the transition to electric vehicles, providing grants aiming to reduce upfront costs for eligible vehicles by as much as £3,750. The spokesperson emphasized the necessity of establishing a tax system that adequately supports infrastructure and public services while ensuring that owning an electric vehicle remains affordable.
Source: https://www.theguardian.com/money/2025/nov/06/electric-vehicles-pay-per-mile-tax-rachel-reeves-budget