Chancellor Rachel Reeves is reportedly considering the introduction of a new pay-per-mile tax for electric vehicles, a move that could add an average of £250 a year to drivers’ costs.
The plan is expected to be unveiled in the upcoming budget on 26 November, aiming to address the decline in fuel duty revenue as more motorists transition to electric cars.
Under the proposal, electric vehicle (EV) owners would be charged nearly 3p per mile, in addition to existing road taxes. The measure is designed to close a widening fiscal gap caused by falling fuel tax income from petrol and diesel vehicles.
A government spokesperson explained: “Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers.”
Reeves is expected to argue that the levy would create a more equitable system, as drivers of petrol and diesel cars currently pay an average of £600 a year in fuel duty. The tax could also help plug a £20bn to £30bn shortfall in public finances by the end of the parliamentary term.
The scheme is likely to begin in 2028 following a consultation period. By then, up to six million motorists are expected to own electric cars or vans, according to the Daily Telegraph, which first reported the proposal.
Calls for a road pricing system have grown in recent years. The Campaign for Better Transport previously urged the government to introduce pay-per-mile charging, while the Tony Blair Institute recommended a simpler model — 1p per mile for smaller vehicles and up to 4p for lorries and heavy goods vehicles.
According to the Society of Motor Manufacturers and Traders, there are already over 1.3 million electric cars on British roads.
As speculation increases over the potential charge, new data from Hastings Direct shows that one-third of Britons are considering “black box” car insurance policies that track driving behaviour to reduce premiums, with middle-aged motorists being the most likely to adopt such technology.
The government has invested more than £4bn to support the shift to electric vehicles, including grants of up to £3,750 for eligible models. “Just as it is right to seek a tax system that fairly funds roads, infrastructure and public services, we will look at further support measures to make owning electric vehicles more convenient and more affordable,” the spokesperson added.
