The Government has announced significant changes to motoring tax rules that will impact owners of electric vehicles (EVs) and plug-in hybrids. Under the new system, some EV owners can expect to pay an average of £455 annually, with higher bills for those who drive longer distances.
A major shift is the introduction of a pay-per-mile tax targeting EVs and hybrids. EV drivers will now be charged 3p per mile driven. Given the average annual mileage in the UK is around 8,500 miles, this translates to approximately £255 per year. Additionally, the vehicle excise duty (VED) for EVs is set to rise to £200 from April, combining for a total of £455.
By 2028, when the pay-per-mile tax takes full effect, it is expected that VED rates may increase further, potentially raising the overall cost for EV owners. Meanwhile, plug-in hybrids will face a lower pay-per-mile rate of 1.5p.
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Drivers who clock above average mileage, including those commuting long distances or living in rural areas, will encounter even higher expenses under the new system.
Government officials argue these changes create a fairer tax structure, ensuring all drivers contribute equitably. They note that traditional petrol and diesel vehicle owners already pay in proportion to usage through fuel duties and taxes.
Simon England, founder of ALA Insurance, expressed concerns about the financial impact of these changes on EV adoption. He stated, “As financial incentives for electric vehicles diminish, charging EV owners as much or more than petrol and diesel drivers could discourage many from making the switch. With the planned ban on internal combustion engines by 2030, these increased costs may serve as a significant barrier.”
The new charges mark a turning point in the UK’s approach to EV taxation, reflecting the need to balance government revenue with the nation’s transition to greener transport.