Millions of electric vehicle (EV) drivers in the UK are set to face a new annual tax of up to £255, following a major announcement by Chancellor Rachel Reeves in the Autumn Budget.
The New Pay-Per-Mile Charge
The new policy, confirmed to begin in 2028, will introduce a pay-per-mile tax specifically for electric cars. Motorists will be charged an extra 3p for every mile they drive. This measure is projected to raise a substantial £1.4 billion in tax revenue for the Treasury.
According to a leaked report from the Office for Budget Responsibility, this new charge is expected to have a significant impact on EV adoption. The OBR forecast suggests the policy could lead to 440,000 fewer electric vehicles on UK roads.
Chancellor's Justification and Industry Backlash
Chancellor Reeves defended the move as a crucial part of plans to "reform our motoring taxes." She stated, "Because all cars contribute to wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just the type of car they own by introducing electric vehicle excise duty on electric cars."
She added that the revenue would help double road maintenance funding in England over the course of the current Parliament. This announcement comes as the government continues its push to phase out sales of new petrol and diesel cars by 2030.
However, the policy was immediately criticised by automotive industry leaders. Ian Plummer, commercial director at Auto Trader, accused the Chancellor of "driving with the handbrake on." He argued, "This sends completely the wrong signal," and expressed doubt that other government moves to make EVs more affordable would sufficiently offset the potential loss in sales.
Financial Impact on Drivers and Fuel Duty Changes
For the average EV owner who drives approximately 8,500 miles per year, the new charge would amount to an extra £255 annually in the 2028-29 financial year.
In a related move affecting all motorists, the Chancellor also confirmed changes to fuel duty. The 5p per litre cut in duty, originally introduced by the Conservative government in 2022, will only be extended until September 2026. This marks the first fuel duty increase in 16 years.
From April 2027, fuel duty rates will then be increased annually in line with inflation. The duty has been frozen since 2010.
Simon Williams, head of policy at the RAC, commented: "Drivers will be relieved the Chancellor has decided to keep the 5p duty cut in place for now as it saves them more than £3 a tank. But this relief will be very short-lived given the staggered increase from next September."
He further noted that without the discount, drivers would still be paying more for a litre of petrol than before Russia's invasion of Ukraine in February 2022, which caused pump prices to skyrocket to record levels.
