7 November 2025
Electric vehicle (EV) drivers could be faced with a new pay-per-mile tax in the Budget, The Daily Telegraph revealed on 7 November 2025.
It stated that under current plans; to be announced by the Chancellor on Nov 26, drivers of electric cars will be charged 3p per mile on top of other road taxes.
The scheme, set to start in 2028 after a consultation, will mean the average driver could face paying an extra £250 a year.
The Treasury will make the move to try to counter the potential of falling fuel duty revenue as people move from petrol to electric cars. Up to six million people are set to be driving EVs by the time the tax comes in.
“Whilst we acknowledge the Treasury will lose fuel duty revenue as drivers go electric, the Government must tread carefully in case their actions slow down the transition to EVs”
Ministers will frame the move as one of fairness, as drivers of petrol cars currently pay £600 a year on average in fuel duty.
They will also argue that it is different from traditional pay-per-mile schemes, with a fee taken each year on estimated travel and no mass electronic monitoring of movements.
AA president Edmund King said: " Whilst we acknowledge the Treasury will lose fuel duty revenue as drivers go electric, the Government must tread carefully in case their actions slow down the transition to EVs.
“The ZEV mandate for 28% of new car sales to be zero emissions this year will not be met in pure sales terms as sales are running at just 22% year to date, although the mandate does allow some off-setting.
We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or just an extra tax."
The Telegraph reveals that the scheme would be aligned to the annual payment of vehicle excise duty (VED), which affects all UK motorists. EV drivers have had to pay the charge since April.
The new element is being described as “VED+” and being framed to get drivers of green cars to pay more each year.
EV drivers will be asked to estimate the number of miles they will drive in the year ahead and pay a fee, set in the current plan at 3p per mile.
If the owner does not drive that amount, some of the money carries over into the next year. If they drive more miles than estimated, they will top up their payment.
The 3p-per-mile charge means drivers face paying an extra £3 for a one-way journey between Cambridge and Oxford or £12 from London to Edinburgh.
There has been further commentary that hybrids would pay a reduced rate and vans would be exempt.
The AA is concerned that speculation about a ‘pay as you go’ scheme might deter some potential EV drivers at a time when the government is trying to encourage EV sales with the Electric Car Grant. The AA will respond to the consultation when it is launched.