What can you buy for 3p these days? Not much unfortunately, but from April 2028, that will buy a mile of driving in an EV.
The reason is that from April 2028, the Government’s new Electric Vehicle Excise Duty (known as eVED) with be in place meaning drivers of electric vehicles have to pay an additional 3p per mile (1.5p per mile for plug-in hybrids) on top of their standard road tax (known as VED).
Since April 2025, all electric vehicles have had to pay road tax (now £200 per year) and, for any cars costing above £50,000 when new, a further £440 for five years.
So why has the Government chosen to introduce this new pay per mile system, how will it work and could there be a better system?
Why has the Government introduced pay per mile on EVs?
As ever with any new form of taxation the reason is simple – to raise money. With more EVs on the roads, the Chancellor is missing out on millions of pounds of additional tax revenue from lack of petrol or diesel sales. Added to that is that with many EVs being charged at home, it’s also missing out on VAT revenue as well as all home electricity is charged at 5% VAT rather than the usual 20%.
Whichever way you look at it, it needs to make up that shortfall somehow and, aside from the standard flat rate annual road tax, there’s no way of taxing additional usage of cars as there is on fuel of traditional ICE vehicles. So it needed to introduce some form of pay-as-you-drive system to raise money and also discourage excessive transport use at the same time. Electric vans will be exempt as they are so low in their take up at present.
The only way to do that is either with road tolls, as they have in Europe, which are expensive to set up and operate or with another form of road charging such as this annual voluntary system.
So how will the new eVED road tax work?
The details are still a little hazy at the moment, but essentially, drivers will declare their annual mileage at the time of their regular MOT and then estimate how many miles they are likely to do in the coming year. The more miles you think you will do, the more you have to pay and at 3p per mile that’s £300 for every 10,000 miles. The OBR claims this is effectively half the current rate for petrol and diesel cars.
You will pay your eVED when also paying your annual road tax and that will allow for an annual reconciliation depending on whether you over or under-paid for the previous year. For those cars under three years old that don’t need an MOT, this will likely have to be done on a voluntary basis – which can then be checked when it comes time to sell the car.
So what are the potential problems with the new eVED road tax?
How long have you got? Aside from the logistical nightmare that it sounds like being for the already over-stretched DVLA, it sounds like it’s introducing a huge amount of complication – there are problems wherever you look.
The reconciliation system sounds difficult and difficult to understand for many people used to the current flat rate system and for those cars over £50,000 that might do 10,000 miles a a year, that could equal close to a £1000 a year road tax bill – for a form of transport that the government was encouraging drivers to take, remember.
There are also already visible gaps in the system too. What about any mileage undertaken abroad? A 2000-mile road trip through Europe would see you pay road tolls in the relevant country, but then also see you pay an additional £60 on eVED despite those miles not having been covered in the UK.
Furthermore, unlike with petrol or diesel cars where the road tax is cancelled the moment you sell the car, with eVED any additional mileage you’ve paid for in advance stays with the car, making it of additional value to any future buyer – though whether they will see it that way is another matter.
By the same degree, the previous owner might have gone past their allocated mileage (especially towards the end of the 12 months) and therefore actually owe money that the new owner will end up having to pay for.
All this is before you’ve also got to mileage blockers as well. Mileage blockers are gadgets which are illegal but widely available and can prevent a car from logging mileage. While they’re meant for vehicles being tested away from public roads, unscrupulous owners could easily use them.
The other wider issue is that it is already causing negative publicity around EVs at a time when car manufacturers are struggling to meet their annual ZEV mandate figures as it is. The Government seems to be kicking EV growth at the same time as wanting to encourage it to grow.
Is there a better system than eVED?
As outlined above, there are many options, but all have their downsides. A road pricing toll system would be difficult and costly to set up and operate and a flat rate system, while easier, doesn’t discourage car usage more generally.
Instead, eVED seems to be a bit of both, with the £50,000 expensive car supplement on top of that, meaning for many EV drivers there will effectively be three lots of road tax to pay.
There is also the fact that all of this eVED system will be running alongside the current system for petrol and diesel cars, who are effectively taxed on usage at the pumps. So the DVLA will have that to administer alongside that the new system for EVs, which gives us a headache just thinking about it.
Perhaps a better system would be to introduce a mileage-based road tax system for all cars – EVs, petrol and diesel – and reduce fuel duty to counter that, but again it’s questionable how that could work and no government would want to do anything that jeopardised tax revenue.
Will the new system work? We’ll find out in 2028…