Charging electric vehicles has no equivalent to the excise duties imposed on fossil fuels and, as electrification increases, this could lead to a sharp fall in state revenues. The British government therefore wants to introduce a form of “electric excise duty” from April 2028, based on mileage travelled. It will be called the Electric Vehicle Excise Duty (eVED) and was announced by Chancellor of the Exchequer Rachel Reeves as part of the Autumn Budget 2025. The tax will apply to all owners of electric and plug-in hybrid vehicles travelling on UK roads, regardless of where they are charged or how the vehicle is used, and will be added to Vehicle Excise Duty (VED), the British equivalent of car tax, which was reintroduced for electric vehicles from 1 April 2025 after years of exemption.
The proposed rates are 3p, about 3.5 euro cents, per mile, or 1.61 km, for battery electric vehicles and 1.5p, about 1.8 euro cents, per mile for plug-in hybrids, with annual adjustment in line with the consumer prices index. HM Treasury made several calculation examples public during the technical consultation launched in 2026: a driver covering 5,000 miles, or about 8,000 kilometres, a year would pay £150, about €175, in eVED.
The tax will be applied through self-declaration. At the start of the tax year, the driver will declare estimated mileage, pay the corresponding amount together with ordinary VED and, at year-end, receive a balancing charge if they have driven more miles than declared or a credit to be carried forward to the following year if they have driven fewer. The methods for verifying actual mileage remain under consultation. Options being studied include self-certification, sample checks and odometer readings during the vehicle’s periodic roadworthiness test.
For a motorist driving between 8,000 and 8,500 miles a year, about 12,875-13,679 kilometres, eVED would entail a cost of between £240 and £255, about €280-300, to be added to ordinary VED, now aligned with that for petrol and diesel vehicles and amounting to about £195-200 a year, or €228-234. Vehicles with a list price above £40,000, or €46,800, are also subject to the surcharge known as the “luxury car tax”, of about £425-440 a year, or €497-515, for five years. According to estimates by the Office for Budget Responsibility (OBR), the independent body that assesses the UK’s public finances, the overall tax burden for an electric vehicle would therefore rise to about 5p, or 5.9 euro cents, per mile, still below the 8p, or 9.4 euro cents, per mile in fuel duty applied to a petrol or diesel vehicle.
The government’s stated aim is to offset the fall in revenue caused by the transition to electric mobility. Fuel duties currently bring in about £25 billion a year, or €29 billion, for the UK Exchequer, a revenue stream that is set to decline progressively as the electric vehicle fleet grows. HM Treasury estimates eVED revenue of £1.1 billion, or €1.3 billion, in the first year of application, 2028-29, rising to £1.8-1.9 billion, or €2.1-2.2 billion, by 2030-31. The measure comes at the end of a three-year transitional period, during which electric vehicle owners continued to pay only the VED reintroduced in 2025. Some sources suggest there could be a safeguard mechanism for vehicles purchased before the scheme fully enters into force, but the detail has not yet been confirmed in HM Treasury’s official documents.
The measure has met resistance in Parliament and across the automotive sector. Some MPs have reported a fall in electric vehicle sales ahead of the tax’s entry into force, while financial analysts have openly described it as a fiscal gamble that risks further cooling a market already under pressure. Consumer associations and motorists’ groups have dubbed the measure a “poll tax on wheels”, fearing it could undermine drivers’ confidence in electric vehicles. Other industry observers, however, have played down the impact of the measure, noting that the tax cost per mile for an electric vehicle would still be lower than that for a combustion-engine vehicle even after eVED is introduced. Some analysts considered a dedicated levy on electric vehicles, calculated on miles travelled, inevitable in the medium term and necessary to keep the financing of the road network sustainable as traffic becomes increasingly electrified. The final text of the eVED scheme is expected at the end of the technical consultation launched by HM Treasury in 2026, which will also determine whether payment will be made monthly or annually.
P.R.
