UK Imposes ‘Pay Per Mile’ Road Tax On Electric Vehicles. Here’s What It Means | Auto News

The OBR estimates the policy will generate £1.1 billion in revenue in 2028-29, rising to £1.9 billion by 2030–31. (Representational Image)

The UK government has officially announced a new pay-per-mile road tax on electric vehicles, confirming that EV and plug-in hybrid owners will need to pay for every mile they drive starting 2028.

Under the new system, electric vehicle drivers will be charged 3 pence per mile, while plug-in hybrid drivers will pay 1.5 pence per mile, with the rates increasing annually in line with inflation. For an annual distance of 8,500 miles, the tax will amount to about £255, according to the Office for Budget Responsibility (OBR), roughly half of what petrol and diesel drivers currently pay through fuel duties.

The OBR estimates the policy will generate £1.1 billion in revenue in 2028-29, rising to £1.9 billion by 2030–31. But the increased ownership cost could reduce EV sales by nearly 4,40,000 over the next five years.

The budget also introduces measures that could boost electric car adoption. The threshold for the expensive-car supplement on EVs has been raised from £40,000 to £50,000, potentially supporting the sale of an additional 3,20,000 vehicles. The government has allocated £1.3 billion to extend the electric car grant until 2030 and another £200 million to strengthen charging infrastructure across the country.

Chancellor Rachel Reeves further announced that the freeze on fuel duty will continue until September 2026.