Overview
The U.K. government will introduce a pay-per-mile charge on electric vehicles from April 2028: 3p per mile for battery electric vehicles (BEVs) and 1.5p per mile for plug-in hybrids (PHEVs), with rates rising annually in line with CPI. The Office for Budget Responsibility (OBR) says this will increase lifetime ownership costs and dampen EV demand over the next five years.
Example: an average BEV driver traveling 8,500 miles in 2028–29 would pay £255 for the year; a PHEV driver at the same mileage would pay about half.
Key measures
- Per-mile charge: 3p/mi (BEV), 1.5p/mi (PHEV), index-linked to CPI from April 2028.
- Expensive Car Supplement (ECS) threshold for BEVs rises from £40,000 to £50,000 from April 2026; ECS is paid over five years starting one year after first registration. For a car bought in 2025–26, total ECS is £2,370 over five years.
- EV grant expansion planned for 2025–26 to 2029–30 (details on interaction with other measures not specified).
- Two-tier structure: PHEVs taxed at half the BEV rate; no exemptions or caps for higher-mileage users were detailed.
- Administrative mechanisms for tracking/collecting mileage not specified; to be set out closer to implementation.
Market impact (OBR assessment)
The OBR estimates around 440,000 fewer EV sales across the forecast period versus its pre-measures outlook. It expects roughly 320,000 of these foregone sales to be offset by other Budget measures (e.g., ECS threshold change, grant expansion), implying net lower EV sales overall. The OBR did not provide a breakdown by year, brand, or segment.
Industry reaction
Industry voices warned about mixed signals to consumers. Ian Plummer of Autotrader said the policy risks slowing EV uptake, arguing only 130,000 sales would be offset by affordability moves and calling the Chancellor “driving with the handbrake on.” He highlighted the OBR’s own view that higher lifetime costs are likely to reduce demand.
What it means for drivers
- New recurring running cost for BEVs starting in 2028–29 (e.g., £255/year at 8,500 miles), rising with inflation.
- PHEVs face about half the per-mile cost of BEVs under the two-tier rate.
- Raising the ECS threshold to £50,000 removes some BEV models from the supplement that would have been caught at £40,000.
- Grants may lower upfront purchase costs, while usage-based charging raises operating costs over time.
- Overall, measures shift the balance between purchase incentives and ongoing costs.
Timeline
- Grant expansion: 2025–26 to 2029–30.
- ECS threshold change for BEVs to £50,000: April 2026.
- Per-mile charge begins: April 2028.
- OBR to reflect impacts in its twice-yearly fiscal forecasts.
Open questions
- How mileage will be recorded and collected for tax purposes.
- Whether exemptions or special rules will apply to high-mileage or business users.
- How the expanded EV grant will interact with the per-mile charge and ECS changes in practice.
