From April 2028, drivers of electric vehicles and plug-in hybrids in the UK will pay a tax based on the number of kilometres driven. In this way, London is seeking to compensate for the gradual collapse in revenue from fossil fuels, without breaking the momentum of the electric market.
A tax designed to avoid a shock
The UK government is planning to introduce a kilometre charge for all electric and plug-in hybrid vehicles. The measure will come into force in April 2028, marking the transition from a fuel-based tax model to one based on usage. This new logic responds to a clear budgetary challenge: the continuing decline in sales of combustion-powered cars is leading to an equivalent fall in tax on petrol and diesel. The future rate will be set at around half of the fuel tax currently applied to drivers of petrol or diesel cars. To be more concrete, 100% electric cars will pay 3 pence per mile, while plug-in hybrids will pay 1.5 pence. According to the Office for Budget Responsibility (OBR) estimate, an EV driver travelling around 8,500 miles a year will pay around £255 in mileage tax in 2028-29.
Added to this is the fact that the annual Vehicle Excise Duty (VED) has been payable on EVs since 2025. The new levy therefore does not replace existing taxes, but complements them. The money raised by this new tax will go directly towards road maintenance: the government has promised to allocate this revenue to maintaining and improving the local road network, with a target of around £2 billion a year by 2029-30. To minimise concerns about surveillance, the system will not rely on real-time tracking. Drivers will have to estimate their annual mileage, pay the tax in advance, and then regularise their contribution according to the meter at the end of the year.
A response to a colossal revenue shortfall
TheOBR predicts that the loss of revenue due to falling fuel taxes (VAT, excise duty, fuel duty) will be major by 2050. Per-kilometre tax could offset around a quarter of this loss, generating an extra £1.4 billion a year according to government projections. The government also intends to maintain other sources of revenue, in particular via the annual Vehicle Excise Duty (VED), which has been applied to EVs since 2025, and taxation of public charging at standard VAT rates.
The UK is trying to reconcile two contradictory imperatives: finding new sources of revenue while continuing to encourage motorists to abandon internal combustion engines. The tax is therefore intended to be measured, almost diplomatic, to avoid discouraging those who are still hesitating to switch to electric cars. But the measure raises an even more important fundamental question. According to the OBR, it could reduce demand for EVs by an estimated 440,000 fewer sales over the next few years. At the same time, the government is maintaining incentives to buy EVs, such as subsidies to support the market despite the increased tax burden.
