UK to Introduce Vehicle Tax for Electric Cars from 2028: What Drivers Need to Know

New Mileage-Based Vehicle Tax to Replace Current Exemptions

The UK government is set to introduce a vehicle tax for electric cars starting in April 2028, ending years of road tax exemptions for zero-emission vehicles. According to BBC News, the move will see electric vehicle (EV) owners paying a “pay per mile” tax, with rates potentially set at 3p per mile.

The reform aims to address the growing revenue gap caused by the decline in fuel tax as more drivers switch to electric cars. While EVs have long been exempt from vehicle excise duty (VED) and other traditional taxes, the Treasury says it must “ensure fairness” between electric and petrol or diesel car owners.

Why the UK Is Changing the Electric Car Tax System

Currently, drivers of petrol and diesel vehicles pay fuel duty and vehicle excise duty, which together contribute billions annually to public finances. However, as electric cars continue to rise in popularity, those tax revenues have dropped sharply.

Under the new vehicle tax electric cars scheme, EVs will contribute through a mileage-based system rather than fuel duty. This EV tax will apply to all electric vehicles registered in the UK from April 2028, including private cars, company fleets, and possibly electric vans.

Analysts estimate that, if set at 3p per mile, the new electric vehicle tax could add up to £300 annually for a driver covering 10,000 miles — a modest figure compared to the average fuel tax costs for combustion-engine vehicles.

What Is the “Pay Per Mile” EV Tax?

The electric car mileage tax will operate on a “pay per mile” basis, meaning drivers will pay depending on how much they drive, rather than owning or refueling their cars.

While final details are still under discussion, several key features have been highlighted:

• The proposed rate is 3p per mile for private electric cars.
  
• Fleet vehicles and company EVs may face different rates.
  
• Payment methods could include digital mileage tracking or annual odometer reports.
  
• The aim is to replace lost revenue from fuel duty, which currently generates over £25 billion a year.
  

Government officials argue that this new mileage tax for electric vehicles will ensure that all road users contribute fairly to road maintenance and infrastructure funding.

Do Electric Cars Currently Pay Road Tax?

As of now, electric cars do not pay road tax (VED) in the UK. They have benefited from zero-rated vehicle excise duty since their introduction, part of a broader effort to encourage cleaner transportation.

However, starting in 2025, EVs will begin paying the standard VED rate for vehicles worth under £40,000. From 2028, this will expand into a new pay-per-mile EV tax, meaning full parity with petrol and diesel cars.

The move marks a significant policy shift away from early incentives toward a more balanced tax structure for all vehicle types.

How Will the Electric Car Tax Affect Drivers?

The introduction of a tax on electric cars could impact both current owners and prospective buyers. For many, EVs were attractive not only for environmental reasons but also for lower running costs and tax exemptions.

While a 3p per mile tax is relatively low, it could still increase the total cost of ownership, especially for long-distance drivers. Industry experts warn that if the government overtaxes EVs, it could slow adoption rates at a time when the UK is trying to phase out petrol and diesel cars by 2035.

Industry Reaction: Balancing Revenue and Climate Goals

Automotive industry groups have voiced mixed reactions. Some support the EV pay per mile approach as a fair and transparent system, while others worry it may discourage electric adoption just as the market reaches mainstream levels.

Environmental advocates urge the government to reinvest the revenue from the electric vehicle tax into clean transport infrastructure, such as charging stations and renewable energy grids.

Manufacturers like Tesla, Nissan, and Tata Motors (which produces the Tata Nexon EV and other models) continue to expand their EV lineups, suggesting long-term optimism for the sector despite new taxes.

The Bigger Picture: A Shift Toward Mileage-Based Taxation

The UK’s new excise duty for electric cars could set a precedent for other countries facing similar fiscal challenges. With fuel duty revenue shrinking globally, governments are exploring pay per mile tax systems to ensure sustainable funding for public roads.

Experts believe this approach will eventually apply to all vehicles, regardless of powertrain, creating a unified system that reflects actual road usage.

Final Thoughts

The vehicle tax for electric cars marks a major change in how the UK funds its transport infrastructure. While the EV mileage tax aims to create fairness and sustainability, it also signals the end of a long-standing incentive that helped jumpstart the electric revolution.

As the 2028 deadline approaches, drivers, automakers, and policymakers will all be watching closely to see how this reform shapes the future of mobility and taxation in the UK.For the latest updates on EV policy, business trends, and startup innovations, visit StartupNews.fyi.