Falling fuel duty revenue will lead the Chancellor of the Exchequer to announce in her budget later this month that electric car owners will be charged for every mile they drive, according to reports.
Information obtained by The Telegraph indicates Rachel Reeves’ Autumn Budget 2025 will bring with it an announcement that from 2028, EV drivers will have to pay 3p to the Treasury for every mile they drive. The scheme is tentatively being referred to as ‘VED+’.
Drivers of petrol-electric hybrid vehicles will be subject to a per-mile charge at a lower rate, and while no further details are available, this would likely only apply to plug-in hybrids rather than ‘self-charging’ ones, which can only cover limited distances on battery power.
The Telegraph reports that rather than track drivers using GPS technology, which would bring with it significant privacy concerns, or use MoT mileage differences, which would not cover vehicles under three years old, every EV driver would be asked to estimate their annual mileage and be charged accordingly.
Those who exceed their mileage estimates would face additional taxes at the end of the year, with those who drive less issued rebates – though the method by which mileages would be corroborated has not been detailed.
Fuel retailers currently collect around £24bn worth of duty each year for HMRC, but the outlawing of sales of new petrol and diesel cars will ultimately bring this revenue stream to an end for Whitehall.
Ministers have been looking at alternatives to fuel duty for some years. The Treasury refused to answer a 2019 Freedom of Information request asking how it intended to recoup tax receipts lost from fuel duty as the matter related to “an area of live policy development”, while in 2022 the Transport Select Committee said it “has not seen a viable alternative to a road charging system based on technology which measures road use”.
The Society for Motor Manufacturers and Traders described a pay-per-mile EV tax as “entirely the wrong measure at the wrong time”, adding: “Introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake – deterring consumers and further undermining industry’s ability to meet ZEV mandate targets, with significant ramifications for perceptions of the UK as a place to invest.
”A smarter, fair and future-ready taxation system requires a fundamental rethink – one that must be done in full partnership with the industry and other stakeholders.”
