A report from the Daily Telegraph has found that a per-mile tax on electric vehicles (EVs) could be proposed in the Budget later this month.
The tax is expected to be 3p per mile, in order to make up from the lack of fuel duty charged on EVs.
As EV adoption accelerates, this shortfall is only expected to widen.
The Daily Telegraph reported that drivers of hybrid vehicles would also be charged, although at a lower rate.
The Vehicle Excise Duty (VED) exemption for EVs was ended earlier in 2025, as part of the 2022 Budget.
Reaction
Vicky Edmonds, CEO at EVA England, said: “This is the wrong time to bring in further costs for EV drivers.
“Our survey data shows that at least half of drivers are still finding the upfront purchase costs of these vehicles to be too high, and that half of EV drivers without driveways are finding their vehicles more expensive to run than their former petrol and diesel cars.
“These challenges to switching to electric must be addressed urgently, and before any scheme that suggests additional costs is considered.”
Mairéad Warren de Búrca, managing director at Alvarez & Marsal’s Indirect Tax, said: “A per-mile charge for EVs would mark a major shift in how the Treasury raises revenue from road users.
“The Chancellor faces a clear tension: maintaining fairness as fuel-duty receipts collapse, without discouraging the switch to electric.
“The measure makes fiscal sense, but as ever, timing will be everything.
“If the Government wants credibility on net-zero and tax reform, it must show this is about modernising revenue, not penalising greener drivers.
“The EV sector will be disappointed, with many hoping for a cut in VAT on public charging from 20% to 5% to match the rate for home charging.
“The real challenge, though, is delivery – a per-mile system would likely rely on manual or self-reported data, creating an administrative headache for the Government.”
Melanie Lane, CEO at Pod, said: “Yesterday’s EV registration figures showed positive momentum and a clear signal that investment and incentives are working.
“We urged Government to reward, not punish, those making the switch – yet today’s pay-per-mile EV tax proposals risk doing exactly that.
“It’s another example of policy that isn’t joined up: feeding with one hand while taking away with the other. This move undermines both the Government’s own EV transition goals and driver confidence, just as adoption is accelerating.
“A Government spokesperson has suggested this will create a fairer system for all drivers – so we also expect to finally see the end of the fuel duty freeze, with no further extensions announced in the upcoming budget.”
James Court, head of policy at Octopus Electric Vehicles, said: “EV drivers should pay – but it should come at the right level and the right time.
“Now would be far too soon – EVs represent only 4% of cars on our roads and a tax would raise a minimal amount until this number is bigger.
“As we’ve seen in other countries, introducing a charge now would stifle the growth we’ve seen over the past years, and be self-defeating.
“What is needed is a considered plan for the best and fairest way for all road users to handle the change in vehicle mix over time.”
Martijn Versteegen, CEO and co-founder at IMAGIN.studio, said: “Our data shows that the most-viewed EVs are smaller, value-driven city cars like the Dacia Spring and Fiat 500 Electric; typically cars that run low mileages.
“A flat pay-per-mile tax system will not only slow the shift to more affordable EVs, but given their low mileage, it’s unlikely to deliver much revenue to the Government.”
Jonathan Haseler, chief revenue officer at Radius, said: “The announcement of plans to introduce an electric vehicle tax, where EV drivers would face a 3p charge per mile, has prompted significant discussion across the industry.
“Until now, EV drivers have benefited from relatively favourable tax treatment, which has helped accelerate adoption.
“Introducing additional costs for high‑mileage business users, such as fleets and leased vehicles, risks slowing that momentum at a critical stage, so it’s unsurprising that the news has generated mixed reactions on social media.
“The change means that businesses relying on high‑mileage EV vehicles, such as fleets, shared mobility, or leased models, will need to factor in additional running costs.
“Ultimately, the shift to a pay‑per‑mile model makes cost certainty and operational efficiency more critical than ever.
“With the tax set to start in 2028, fleet drivers may face uncertainty over future costs and charging, which could make fleet managers hesitant to invest more into EVs.
“Introducing this tax now risks slowing the pace of EV adoption, and maintaining supportive policies for business EVs should remain the priority.
“For a vehicle driving 20,000 miles a year, the new charge could add around £600 in annual running costs. At this stage, predictable costs and continued support for EV uptake are essential to keep businesses moving toward electric fleets.”
