The UK’s Labour government is considering introducing a pay-per-mile tax for electric vehicles (EVs) as fuel duty revenues continue to decline, according to a report from The Daily Telegraph. Chancellor Rachel Reeves is said to be preparing the measure, which would charge EV owners around 3 pence ($0.04) per mile to help replace billions in lost fuel tax income.
Based on the proposed rate, a typical driver covering 8,000 miles (12,900 km) annually would pay around £240 ($315) per year. The government is expected to argue that EV owners would still be paying less overall than petrol and diesel drivers, who contribute roughly £600 ($784) annually in fuel duty.
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The policy, if implemented, could take effect by 2028. When combined with the recently reinstated annual Vehicle Excise Duty (VED) of £195 ($255), EV owners could face about £435 ($568) in additional yearly costs compared with 2024. Despite the added burden, the government has introduced grants of up to £3,750 ($4,900) for new electric car buyers, partially offsetting ownership costs.
It remains unclear how mileage would be tracked or reported. Early reports suggest drivers might be asked to declare their estimated mileage for the year, with rebates or extra charges applied later based on actual use.
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The UK’s Society of Motor Manufacturers and Traders (SMMT) voiced concern over the proposal, saying it “recognizes the need for a rethink over vehicle taxation,” but called the pay-per-mile approach “entirely the wrong measure at the wrong time.” The group warned it could “deter consumers and further undermine industry’s ability to meet ZEV mandate targets, with significant ramifications for perceptions of the UK as a place to invest.”
