Britain will extend its electric vehicle subsidy programme to 2030 with an additional £1.3 billion in funding, while simultaneously introducing a new mileage-based tax for battery-electric and plug-in hybrid vehicles from 2028, the government confirmed as part of its newly published budget plans.
The latest funding follows reports earlier this week, based on leaked documents, that the government intended to expand support for electric vehicles. The confirmation brings total funding for the Electric Car Grant (ECG) to just under £2 billion, including £650 million already allocated earlier for the period from mid-2025 to the 2028/29 financial year. Under the current scheme, electric vehicles with a list price of up to £37,000 qualify for grants of up to £3,750 per vehicle.
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The newly approved £1.3 billion will secure the incentive programme through to the end of the decade and is expected initially to increase grant levels, though detailed allocation rules have not yet been published. Additional support measures include tax relief for companies developing charging infrastructure and operating EV fleets, alongside fiscal incentives aimed at accelerating charger deployment, subject to parliamentary approval of the budget.
The policy shift comes as the UK struggles to align EV adoption with the targets set under its Zero Emission Vehicle (ZEV) mandate. Although 382,000 new EVs were sold in 2024, making the UK the largest EV market in Europe, manufacturers are still under pressure to meet annual sales quotas. This year’s requirement stands at 28% of total sales, rising sharply to 80% by 2030. In 2024, many brands met targets only through deep discounting, prompting the government to relax ZEV rules slightly in April 2025.
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From 2028, the government plans to introduce a mileage-based levy called Electric Vehicle Excise Duty (eVED), effectively placing EVs and plug-in hybrids on a similar footing to petrol and diesel vehicles for road taxation. The proposed rates are 3 pence per mile for fully electric vehicles and 1.5 pence per mile for plug-in hybrids. The Treasury is seeking to recover lost fuel duty revenue as EV adoption increases. The Office for Budget Responsibility expects the measure to raise £1.1 billion in 2028/29 and £1.9 billion by 2030/31.
“In moves to update the tax system for a modern-day economy the government is introducing a new per mile levy for electric and plug-in hybrid cars, coming in 2028,” the government said in a statement. “All cars contribute to wear and tear on our roads, so it is only right that our motoring taxes cover EVs via a modest per mile levy, with extra support to keep EV ownership attractive.”
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Alongside the new EV levy, the government also plans to raise petrol and diesel fuel duty for the first time since 2010 from September 2026. The current rate of 52.95 pence per litre, introduced in 2022 to cushion price shocks following Russia’s invasion of Ukraine, will remain frozen until next summer.
The budget also includes several additional e-mobility measures: a 10-year, 100% business rates relief for eligible EV charging points and EV-only forecourts; a one-year extension of 100% first-year capital allowances for zero-emission vehicles and EV chargepoints to 2027; a temporary company car tax easement for plug-in hybrids until April 2028; an increase in the Vehicle Excise Duty Expensive Car Supplement threshold to £50,000 for zero-emission vehicles from April 2026; and a government review into the cost of public EV charging, scheduled to begin in early 2026.
Source: gov.uk (fact sheet), gov.uk (statement), gov.uk (policy paper)