Rachel Reeves has confirmed a new pay-per-mile car tax set to affect millions of electric and hybrid vehicle owners starting April 2028. Under the upcoming scheme, electric vehicle (EV) drivers will be charged 3p per mile, while plug-in hybrid owners will incur a rate of 1.5p per mile.
This means that drivers covering around 8,000 miles annually will face a £240 charge if they drive an EV, and £120 if they drive a plug-in hybrid. The move has raised concerns among experts who fear it could add complexity and additional costs at a time when the adoption of zero-emission vehicles is gaining momentum.
Matthew Walters, an EV specialist at Ayvens, warned that the new charge may undermine the simplicity and cost-effectiveness that have been key factors in attracting drivers to electric vehicles. He emphasized that this policy could deter potential buyers, causing them to hesitate or delay switching from petrol or diesel cars.
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Industry insiders reveal that ongoing discussions with the government aim to find solutions to maintain strong growth in EV sales. Some sources indicate that the Treasury is worried the pay-per-mile tax could dampen enthusiasm for electric vehicles, threatening the pace of the transition to cleaner transport.
The Office for Budget Responsibility (OBR) forecasts that this policy could reduce EV sales by approximately 440,000 vehicles between November 2025 and March 2031. However, the Treasury disputes these numbers, suggesting the actual shortfall will be closer to 120,000.
As the UK prepares for this significant tax shift, the challenge will be balancing revenue needs with policies that continue to encourage drivers to embrace electric and hybrid vehicles.