EV drivers: New 3p pay-per-mile tax could cost you £250 a year

Electric vehicle (EV) owners in the UK could soon face an additional annual expense, as the Treasury considers a new 3p-per-mile tax that may cost the average driver around £250 per year. The proposal, reportedly under review by Chancellor Rachel Reeves, aims to address the growing shortfall in fuel duty revenue as more motorists switch to electric cars (Carwow, 2025).

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What’s being proposed

The central idea behind the proposed policy is to introduce a pay-per-mile charge for EVs to ensure all drivers contribute fairly to road infrastructure funding. Traditional petrol and diesel vehicle owners currently pay significant amounts through fuel duty – an average of around £600 annually – which EV owners currently avoid (Carwow, 2025). Under the new plan, electric drivers would pay approximately 3p for every mile driven, equating to about £240–£300 a year for those driving between 8,000 and 10,000 miles (The Independent, 2025).

According to early reports, the scheme could be administered similarly to existing vehicle excise duty (VED) payments. Drivers might declare their anticipated mileage for the year and pre-pay the tax, with adjustments made later based on actual mileage (The Independent, 2025). The proposal is still under consultation, but the government intends to implement it by 2028 (Evening Standard, 2025).

Why now?

The move comes amid a pressing concern over the decline in fuel duty revenues, which have traditionally provided billions in government funding. As EV adoption increases, this income stream is rapidly shrinking, creating what economists describe as a “fiscal black hole” (The Independent, 2025).

The Treasury argues that introducing a mileage-based tax will create fairness between motorists, as EV drivers currently pay far less in motoring taxes than their petrol and diesel counterparts, despite using the same road network (Evening Standard, 2025). Reeves has emphasised the need for a sustainable and equitable model for road taxation that reflects the changing vehicle landscape (The Guardian, 2025).

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What it means for EV drivers

If introduced, the pay-per-mile system would represent a shift from indirect taxation through fuel purchases to direct mileage-based charging. For most EV owners, the additional annual cost of roughly £250 would reduce – but not erase – the overall savings compared with internal combustion engine (ICE) cars.

Petrol and diesel drivers currently pay around 7p per mile in taxes through fuel duty and VAT, meaning the proposed 3p rate for EVs is still relatively modest (Carwow, 2025). Nevertheless, the tax could be perceived as a deterrent at a time when the government is trying to accelerate EV adoption ahead of the 2035 petrol and diesel ban (Financial Times, 2025).

High-mileage drivers such as commuters and delivery operators would feel the impact most sharply. Conversely, those who use their vehicles less frequently could end up paying less, particularly if the government introduces a carry-over or refund mechanism for unused mileage estimates (The Independent, 2025).

Industry reaction

Motoring and environmental groups have offered mixed responses. The Society of Motor Manufacturers and Traders (SMMT) criticised the proposal as “the wrong measure at the wrong time,” arguing it could slow the uptake of electric vehicles at a critical moment in the UK’s transition to zero-emission transport (Autocar, 2025).

Industry analysts, however, acknowledge the need for reform. With fuel duty revenue projected to fall by billions over the next decade, a per-mile system may be inevitable. The challenge lies in implementing it without discouraging EV adoption or penalising early adopters who switched to electric vehicles under the assumption of lower long-term costs (Financial Times, 2025).

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What drivers can do

EV owners and prospective buyers should begin factoring this potential change into their total cost of ownership calculations. Tracking annual mileage can help estimate future tax liabilities. Drivers may also wish to participate in consultations or through advocacy groups to influence how the system is designed – particularly on issues such as low-mileage thresholds or exemptions for rural drivers (The Guardian, 2025).

While EVs remain significantly cheaper to run than petrol or diesel cars, especially when charged at home, the proposed pay-per-mile tax marks a turning point. It signals that the era of “tax-free” electric motoring may soon end, reshaping how the UK funds its roads in the age of electrification.

References

Autocar. (2025) Industry reacts to pay-per-mile tax for EVs: “entirely the wrong measure”. Available at: https://www.autocar.co.uk/car-news/electric-cars/industry-reacts-pay-mile-tax-evs-entirely-wrong-measure (Accessed: 6 November 2025).

Carwow. (2025) Electric cars could face 3p-per-mile tax under new Treasury plans. Available at: https://www.carwow.co.uk/news/9860/electric-cars-pay-per-mile-november-budget (Accessed: 6 November 2025).

Evening Standard. (2025) Pay-per-mile tax explained: Rachel Reeves’s plans for EV drivers. Available at: https://www.standard.co.uk/news/uk/pay-per-mile-tax-explained-rachel-reeves-b1256786.html (Accessed: 6 November 2025).

Financial Times. (2025) EV tax proposal spurs debate about who should pay most on UK roads. Available at: https://www.ft.com/content/8c8552f2-13e3-417e-a90d-b55074f95fe6 (Accessed: 6 November 2025).

The Guardian. (2025) Rachel Reeves considering pay-per-mile tax for electric vehicles in budget. Available at: https://www.theguardian.com/money/2025/nov/06/electric-vehicles-pay-per-mile-tax-rachel-reeves-budget (Accessed: 6 November 2025).

The Independent. (2025) EV drivers could pay 3p per mile under new pay-per-mile tax plans. Available at: https://www.independent.co.uk/cars/electric-vehicles/paypermile-car-tax-ev-drivers-b2859696.html (Accessed: 6 November 2025).

Formula One has a new championship leader for the first time since April after Lando Norris stormed to a dominant Mexico City GP victory. The Briton now sits one point ahead of title rival and teammate Oscar Piastri, who struggled all weekend in the Mexican capital. Norris' eventual 30-second lead over P2 might suggest this race was dull, but that couldn't be further from the truth with four-wide fights, split strategies, and brave overtakes throughout.

Norris began from pole after recording one of his best-yet Qualifying laps to return to the front for the first time since Belgium in July. The McLaren man might've felt under threat at being the lead car on the long run to the first braking zone, but he got away well to retain P1. An all-star trio of Charles Leclerc, Lewis Hamilton, and Max Verstappen were chasing Norris down to Turn 1, and the four cars were alongside each other when they hit the brakes.

Intelligent positioning from Norris had him covering the inside line, and he apexed the right-hander unopposed. His defence left Hamilton and Leclerc millimetres apart, and Verstappen on the kerbs. While Hamilton slotted in behind Norris, Leclerc and Verstappen cut across the grass to avoid contact. Their corner-cutting moves saved them from damage, but had Leclerc sitting ahead of the pack and Verstappen slotting in in front of Hamilton. Both seemed to feather the throttle to let Norris and Hamilton through, respectively. Still, George Russell asked questions about the legitimacy of their driving decisions.

Interestingly, Red Bull went against the prevailing Soft tyre strategy and equipped Verstappen with Medium Pirellis. Despite this compound delta, he kept on the tail of Hamilton in the opening laps, and the two old rivals went wheel to wheel at the front once again. A snap of oversteer at Turn 1 had close contact and Hamilton on the runoff, with the favour returned into Turn 2 as Verstappen again took to the grass. The subsequent DRS run to Turn 4 also involved Russell, who had closed in on Hamilton, as the Ferrari locked its front left tyre. Hamilton cut across the grass this time to leave Verstappen battling his compatriot behind.

Unfortunately for Hamilton, the Verstappen fight left him sandwiched between Russell and, surprisingly, Ollie Bearman. The Haas driver took full advantage, sweeping around the outside of the Red Bull at Turn 7 to snatch P4. With Verstappen falling back, Hamilton could not let the reigning champion close back in, and the stewards promptly handed a 10-second penalty his way for leaving the track and gaining an advantage. With Andrea Kimi Antonelli also sneaking past Russell, the squabbling had very much upset the order at the top.

The race somewhat settled down from there as lift-and-coast driving and tyre management became a concern at this high-altitude circuit where engine cooling is problematic. Hamilton was the first to stop, serving his time penalty as he dropped down the order, promoting Bearman to a podium position. Others soon followed suit, but high tyre degradation forced many to a two-stopper; Verstappen, however, stretched his Pirelli Mediums past the halfway point, essentially committing to stopping once.

Red Bull's gamble looked as though it might not come off, but the lighter car and Soft tyres worked well for Verstappen, whose late-race pace was only matched by Norris' in the lead. Rejoining in P8, Verstappen had the crowds part ahead of him as his rivals couldn't make their Mediums work and needed to stop again. Key among the yellow-ringed Pirelli runners were Antonelli, Russell, and Piastri, all fighting for P4. Arguably in reverse-speed order, Russell had to fight his case for team orders to get by his rookie teammate to have a chance at the podium. A pass on Hamilton was all Verstappen needed to do as everyone else stopped. It was a much simpler DRS overtake this time, down the main straight and through, with no grass-cutting required.

Those cars between Verstappen's P7 and a podium place all needed to go for a second trip to the pit lane, and even that provided drama in this high-octane Sunday. Antonelli, now the driver ahead of Piastri, stopped alongside the McLaren man. A fast stop from the 2025 constructors' champions had them swap their Australian to Pirelli's Soft tyre quicker than Mercedes could with Antonelli to advance Piastri up to P6. With Bearman and Russell stopping one lap later, Verstappen had reached P3 behind Leclerc and was quickly closing in on the Ferrari.

The fighting further back wasn't complete, though. Piastri's recovery drive had reached the rear wing of Russell's Mercedes after his team's quick stop had him past the sister Silver Arrows machine. A last-second jink to the inside at Turn 1 was all he needed to do after piling on the pressure for several laps, and P5 was his. That left Russell with double pain, having earlier told his team he'd give Antonelli the position back if he couldn't reach the podium spot. He promptly let Antonelli pass, dropping from P5 to P7 in only a few laps after once dreaming of silverware.

This Mexico City GP was ready to boil over into a grandstand finish as Verstappen continually closed in on Leclerc, and Piastri inched closer to Bearman. Each fight had only six-tenths separating the cars on the penultimate lap, but a Virtual Safety Car killed the tension. Carlos Sainz pulled over in the stadium section, retiring from the race. Despite the Spaniard's best efforts to pull off the circuit, marshals needed to enter the track, necessitating the VSC to end the race under slow conditions.

With both Verstappen and Piastri possibly set to secure extra points, the VSC could have consequences in the title fight if the championship remains as tight as it is today. One point separates the top two with just four rounds remaining, and Verstappen continues to be the wildcard behind. It's shaping up to be an incredible final month for Formula One, with the racing resuming in a fortnight in Brazil for the São Paulo GP.