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).
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).
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).
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).
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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).
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.
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).