Certain motorists will be compelled to pay a new levy based on how many miles they travel throughout the year. Rachel Reeves has announced the launch of a new pay-per-mile tax, how it will work and who it will target. It will apply to specific types of vehicles and owners will be charged at a rate of 3p or 1.5p per mile.
This will amount to hundreds of pounds annually for many drivers. The new tax will come into force in April 2028 and apply to owners of electric vehicles (EVs) and plug-in hybrids, reports Birmingham Live.
Drivers switching to electric over the coming years will need to factor in these additional costs. An EV driver covering 10,000 miles a year will have to fork out £300 extra annually, to be paid alongside vehicle tax. However, those who depend on their vehicles to travel greater distances will face considerably steeper payments. Concerns have been raised that the new tax could dampen EV sales, but the Government insists it will establish a fairer system.
Petrol and diesel owners are already charged according to how far they drive through fuel and duty costs. Yet it represents a further sign that ministers are increasingly looking to electric vehicle owners as a source of tax revenue.
They were made to pay vehicle tax for the first time last year. Simon England, founder of ALA Insurance, said: "Drivers are being encouraged to switch to electric cars ahead of the 2030 ban on ICE vehicles but financial incentives are quickly disappearing. If EV drivers are expected to pay the same, or more, than petrol and diesel drivers, then that's a legitimate barrier that will deter thousands of road users from switching. The rise in EV adoption will leave quite a gap in the government's revenue from road tax, but raising taxes for electric cars is definitely off-putting to people considering a switch, especially when they won't have a choice from 2030, as it stands."
Treasury minister Dan Tomlinson explained: "At Autumn Budget 2025, the Government announced the introduction of electric vehicle excise duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028.
"Drivers will pay for their mileage alongside their existing vehicle excise duty (VED)."
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