Diesel drivers in the UK could soon be paying an eye-watering 86 pence per litre in taxes under new government tax policies alongside already high fuel duties. As the Labour Party government prepares to introduce the Electric Vehicle Excise Duty (eVED) system from April 2028, which will charge EV users per mile driven, diesel motorists will continue to face steep tax rates on their fuel.
Currently, diesel costs average 140.83p per litre, with premium diesel reaching 161.48p. However, these prices include a heavy tax component. According to the RAC, fuel duty adds 57.95p per litre, and a 20% Value Added Tax (VAT) is also applied, meaning that over 60% of the pump price goes directly to the Treasury. Combining fuel duty and VAT, diesel drivers effectively pay approximately 86p per litre in tax alone.
The Chancellor, Dan Tomlinson, outlined the upcoming eVED system at the Autumn Budget 2025, explaining that electric and plug-in hybrid vehicles will face an additional mileage charge to complement the existing Vehicle Excise Duty. Fully electric vehicles will be charged 3 pence per mile, while plug-in hybrids will pay 1.5 pence per mile.
Labour Party Chancellor Ms. Reeves emphasized the fairness of this approach in the House of Commons, stating, “Because all cars contribute to the wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive and not just by the type of car they own.” The revenue generated through this system is expected to double road maintenance funding in England over the course of the parliament.
Ms. Reeves also announced moves to regulate the taxi industry by ending ride-hailing companies’ use of a discounted scheme originally intended for coach tours. While some have labeled the initiative a “taxi tax,” it received support from Steve McNamara, general secretary of the Licensed Taxi Drivers’ Association, who called it “a landmark moment for fairness and integrity in our industry.”