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A Major Shift for EV and PHEV Drivers
The taxation framework for electric vehicles (EVs) in the UK is set for a significant update. It has been officially confirmed that drivers of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) will be subject to a new mileage-based charge, dubbed eVED, beginning in April 2028.
This measure is being introduced by the Treasury to establish a long-term, sustainable method of vehicle taxation as the adoption of cleaner vehicles accelerates.
Key eVED Rates and Financial Impact
The specific per-mile rates for the initial 2028–2029 financial year have been published:
Vehicle Type | Mileage-Based Charge Rate |
Battery Electric Cars (BEVs) | 3 pence per mile |
Plug-in Hybrid Cars (PHEVs) | 1.5 pence per mile |
It is important to note that electric vans, trucks, and motorcycles will initially be exempt from this new charge.
Analysis from the Office for Budget Responsibility (OBR) suggests that an average EV driver covering 8,500 miles annually will pay an estimated £255 from the eVED. This figure is calculated to be roughly equivalent to half the rate of fuel duty currently paid by petrol and diesel car drivers.
System for Reporting and Monitoring Mileage
The new system will require drivers to self-report their estimated annual mileage. Customers will have the flexibility to pay this charge either as an up-front lump sum or through a monthly Direct Debit arrangement.
Annual verification of mileage will be a mandatory step. This checking procedure is expected to be integrated either into the existing MOT test or through a dedicated annual check, which will likely be conducted at approved MOT stations.
Relief for Premium EV Buyers: Luxury Car Tax Threshold Rises to £50,000
Increased Incentives for Electric Vehicle Adoption
In a move designed to support the UK's transition to electric mobility, the government is introducing key financial incentives. This is seen as a crucial step to balance the impact of the newly announced mileage-based charge (eVED).
The headline change focuses on the Expensive Car Supplement (ECS), often referred to as the 'Luxury Car Tax', which is being adjusted specifically for electric cars.
The Expensive Car Supplement (ECS) Change
From April 2026, the list price threshold for electric cars subject to the ECS will increase from £40,000 to £50,000.
Vehicle Type | List Price Threshold for ECS (from April 2026) | Annual ECS Surcharge (Years 2-6) |
Battery Electric Vehicles (BEVs) | £50,000 | £425 (if list price exceeds £50,000) |
Petrol, Diesel, & Hybrids | £40,000 | £425 (if list price exceeds £40,000) |
The Electric Car Grant Extended
In further support of EV buyers, the government has provided a substantial boost to the Electric Car Grant (which offers discounts of up to £3,750 off the list price of eligible EVs).
The grant has received £300 million in additional funding and is now scheduled to continue running until 2030. This extension provides long-term certainty for customers purchasing entry-level and mid-range electric models.
EV charging cost to be reviewed
The government will review rising public EV charging prices in early 2026, with findings due in Q3. The review will assess the impact of energy price increases, the 20% VAT on public charging, and National Grid connection costs, aiming to identify ways to reduce charging costs for drivers.
An extra £200 million will be invested to help the UK reach its target of 300,000 EV charge points by 2030, including support for both home and workplace charger installations.
Businesses installing EV chargers - including public charging networks - will receive 100% business rates relief for 10 years, helping to limit costs passed on to consumers.
Fuel Duty Freeze
The Chancellor has confirmed that the current fuel duty freeze will remain in place until September 2026, offering continued relief for motorists and businesses.
However, this support will begin to change thereafter. The 5p-per-litre fuel duty cut, originally introduced in 2022, will be phased out through a staggered reversal. Starting in April 2027, fuel duty will once again rise in line with the Retail Prices Index (RPI).
These planned changes mean drivers should expect gradual increases in fuel costs from 2027 onwards as duty levels return to their pre-cut trajectory.
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