Electric vehicle owners are set to pay a new mileage-based charge under plans expected to be confirmed in the Chancellor’s Budget on Nov 26, according to details first reported by The Telegraph.
The proposal would add a 3p-per-mile levy for EV drivers, applied alongside existing road taxes.
Following a consultation, the system is due to begin in 2028 and is forecast to add around £250 a year to the typical driver’s costs.
A source says the Treasury is moving ahead with the change as fuel duty receipts continue to decline, with more motorists switching from petrol and diesel models. Officials expect up to six million people to be driving electric cars by the time the charge is introduced.
Ministers are likely to present the measure as a fairer approach, noting that petrol and diesel motorists currently contribute roughly £600 annually through fuel duty. They are also set to stress that the policy does not amount to surveillance, as it will rely on estimated annual mileage rather than active tracking.
However, the plan is likely to spark debate about whether it paves the way for broader pay-per-mile taxation for all drivers in future, and how such a system would ultimately be enforced.
Responding to the proposal, Sir Mel Stride, the Conservative shadow chancellor, said:
“If you own it, Labour will tax it. It would be wrong for Rachel Reeves to target commuters and car owners in this way just to help fill a black hole she has created in the public finances.
“With Labour’s cost of living crisis, now is not the time to hit hard-working families and businesses with another tax raid.”
Paul Johnson, the former Institute for Fiscal Studies chief, said pay-per-mile charges might not be “perfect” but could still work. Posting on X, he said the Government had “failed to act for too long” as fuel duty revenue falls, adding it was “absurd” that some cars are still “untaxed”.
How it would operate
Ideas for mileage-based road tax have circulated in government and the automotive sector for years. The current version would be linked to annual vehicle excise duty (VED), which has applied to electric cars since April. The additional charge is being informally referred to as “VED+”.
Under the proposal, EV owners would submit an estimate of how far they expect to travel in the coming year and pay 3p for each anticipated mile. Drivers who fall short of that mileage would be able to roll over the unused portion; those who exceed it would pay the difference.
Based on this rate, a single journey between Cambridge and Oxford would cost an extra £3, while a trip from London to Edinburgh would add about £12. Hybrid vehicles would also be subject to the levy, though at a reduced rate.
Officials estimate the policy could raise £1.8bn for the Treasury by 2031. When approached, a Treasury spokesperson declined to comment on Budget speculation.
The plan follows recent remarks by Chancellor Rachel Reeves that “all will have to contribute” to restoring the nation’s finances, signalling a Budget that leans heavily on revenue-raising measures.
While the switch to electric vehicles has been encouraged to help cut emissions, it has created a long-term fiscal challenge: fully electric cars incur no fuel duty. Treasury projections indicate around £12bn a year could be lost by 2040 as petrol usage continues to fall.
Enforcement concerns
Ministers are expected to argue that motorists already pay for road use through fuel duty, which works out at roughly 6p per mile. The new EV charge is set at half that level for now, although costs could change over time, just as fuel duty has risen from its original 1908 rate of one penny per gallon to 52.95p per litre today.
Questions remain over how the new system will be monitored. Although the current plan does not include mileage verification, future versions could require proof such as odometer photographs. Responsibility for running the scheme would fall to the Driver and Vehicle Licensing Agency, which already enforces VED through number-plate cameras and roadside checks against its database.
Alongside the tax, the Government says it is preparing a wider package of support measures for the electric vehicle sector, aiming to maintain incentives for drivers to switch to cleaner transport.
Have your say – What do you think?
Do you own an electric vehicle or were you considering buying one? Will this new charge put you off switching to an EV, or do you think it’s a fair way to fund road upkeep as fuel duty declines? We’d love to hear your views.
