In the Autumn Budget, Chancellor Rachel Reeves announced plans to introduce a per-mile tax on electric vehicles (EVs), while continuing the 5p freeze on fuel duty.
EV drivers will be charged 3p per mile under the scheme, while plug-in hybrid (PHEV) drivers will be charged 1.5p per mile.
The scheme will be introduced in 2028 and is intended to cover the fall in fuel duty revenue from the switch to EVs.
Drivers will be required to estimate their mileage and pay ahead of time.
Peter Golding, CEO at FleetCheck, said: “For fleets, the big news in the Budget is something that won’t take effect for some time yet – pence per mile road charging for EVs set to come into effect in April 2028.
“We’ve all known that this was coming for a while and it’s understandable that the Treasury wants to fill this hole in its finances.
“What fleets need to ensure through conversations with the Government is that any future scheme doesn’t happen in such a way that it hampers electric vehicle adoption in the short-medium term and that the means of measuring mileage and collecting the charges are simple and robust.
“Ideally, we’d like to see a technology-based solution that offers a high degree of automation and ease of use.”
Matas Buzelis, motoring expert at carVertical, said: “Slapping a new mileage tax on electric cars sends the worst possible message at the worst possible time.
“For a lot of drivers, the big selling point of an EV has always been cheaper running costs.
“If that advantage is taxed away, many will stick with petrol and diesel for longer and be reluctant to upgrade.”
The 5p cut to fuel duty, introduced in 2022, will be retained until September 2026.
It was initially intended as a temporary measure to ease the cost of living, following the Russian invasion of Ukraine.
From April 2027, fuel duty will be increased annually using the Retail Price Index (RPI).
Simon Williams, head of policy at the RAC, said: “Drivers will be relieved the Chancellor has decided to keep the 5p duty cut in place for now as it saves them more than £3 a tank.
“But this relief will be very short-lived given the staggered increase from next September.
“Without the discount, drivers would still be paying more for a litre of petrol than they were prior to Russia’s invasion of Ukraine in February 2022 which sent pump prices rocketing to record levels.
“The introduction of the long-awaited Fuel Finder in early 2026 will also be a big moment – for the first time, all petrol stations will need to report their prices allowing customers to find the cheapest fuel wherever they are.”
Reeves also decided to delay changes to Employee Car Ownership Schemes (ECOS), which would have seen ECOS cars reclassified as company cars, increasing costs.
The change has been delayed until 2030, with a two-year transition period.
The Chancellor also allowed EV salary sacrifice schemes to continue in their current form.
The Autumn Budget saw a further £200m pledged to the rollout of EV charge points, while £1.3bn of further funding was confirmed for the Electric Car Grant, allowing it to be extended until 2030.
Thom Groot, CEO at The Electric Car Scheme, said: “The Chancellor’s £1.5bn commitment to electric vehicles should be applauded.
“Further provisions for the Electric Car Grant, investment in electric charging points, and the retention of electric vehicle salary sacrifice in its current form, will help more middle-income working families to access cleaner transport they otherwise couldn’t afford, delivering positive health and societal outcomes that benefit everyone.”
Reeves also raised the Expensive Car Supplement (ECS) threshold for EVs to £50,000, up from £40,000.
