The Government is planning to digitally track electric car owners facing a new pay-per-mile tax under proposals revealed in the small print of the Budget.
The new levy, which is set to cost the average driver around £300 a year, was first announced during Sir Keir Starmer’s premiership.
It will see drivers who own fully electric cars and plug-in hybrids obligated to provide accurate mileage estimates to the DVLA so the cost of their pay-per-mile tax bills can be calculated.
Under the current plans, the pay-per-mile charge will apply to cars, not electric vans.
Why is the EV pay-per-mile tax being introduced?
While petrol and diesel drivers contribute towards road use through fuel duty, EV motorists pay no equivalent charge.
Fuel duty costs petrol and diesel vehicle drivers around £480 per year on average, according to Treasury figures. Fuel duties are a key source of revenue for the Government, generating £24bn for 2025-26. The duty, which stands at 52.95 per litre, will be frozen until July 2027.
But with more drivers switching from petrol and diesel to electric, the EV pay-per-mile tax was devised in response to the decline in fuel duty revenue.
What options do EV owners have for paying the tax?
The charge will be introduced from April 2028.
It will initially be charged at a rate of 3p per mile for EVs and 1.5p for plug-in hybrid electric vehicles (Phevs).
The Government will digitally track drivers’ mileage to determine how much they will be charged, under proposals outlined in the small print of Andy Burnham’s first Budget.
It said it will develop an “opt-in system to make use of vehicles’ in-built connectivity”.
The majority of modern cars show mileage electronically near the speedometer, and newer EV and hybrid models have internet connectivity and GPS. These are the functionalities the Government intends to use monitor to determine how much drivers’ pay-per-mile tax bills should be.
This digital reporting system, eVED Connect, will enable motorists to use such connectivity so that they do not have to report their mileage manually.
A Treasury spokesman said: “There will be no requirement to install trackers in cars, or report where and when miles are driven.”
EV owners who opt-out of the system, will be able to supply their mileage reading manually, and officials will use mileage data collected during annual MOTs to ensure figures supplied by drivers are accurate.
If the mileage is higher than the estimate provided by the owner, they will be required to pay the balance.
Will charges differ for owners of new and old EVs?
EV car owners who drive 10,000 miles a year, the pay-per-mile charge at 3p will equate to £300 annually for 2026/27, while plug-in hybrid owners will pay £150 annually for the same mileage. The
The tax is charged at the same rate for brand new models such as the latest BYD model to older cars such as the first generation Nissan Leaf.
However, the total tax bill will be higher for vehicles due to the road tax owners pay, which varies depending on when cars were first registered.
Most electric car owners will be charged £200 for road tax in 2026/27. Motorists with cars registered between 1 March 2001 and 31 March 2017 will pay £20, and those with EVs registered from 1 April with a list price of £50,000 will pay an extra £440 a year for five years from the second year onwards.
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