BUDGET NEWS
GOVERNMENT TO INTRODUCE PAY-PER-MILE CHARGE FOR ELECTRIC AND HYBRID VEHICLES
The UK government is set to introduce a pay-per- mile charge for electric and hybrid vehicles starting in April 2028, which could significantly impact taxi and private hire drivers adding substantial costs for high-mileage EV drivers in the our sector.
In order to raise a predicted £1.9billion for the Government’s coffers by 2030, the Chancellor used her Budget to confirm the Treasury’s controversial road pricing plans. Pay-per-mile schemes have been batted around for years as MPs have struggled to find ways to fill the £40billion fiscal black hole created by the switch to EVs and the loss of motoring taxes including fuel duty.
The mileage-based electric Vehicle Excise Duty (eVED) was announced by Chancellor Rachel Reeves on Wednesday 26 November.
Ms Reeves told Parliament:
“All cars contribute to wear and tear on our roads, so it is only right that our motoring taxes cover EVs via a modest per mile levy, with extra support to keep EV ownership attractive.”
This new tax, estimated at 3p per mile for EVs, and 1.5p per mile for those driving plug-in hybrids,
will
increase annually in line with the Consumer Price Index.
All of this will come on top of Vehicle Excise Duty (VED), which currently stands at £195 per year.
However, Labour hopes it won’t lose everyone, though, because it has also simultaneously increased the threshold above which the £425 Expensive Vehicle Supplement to VED is paid; from April 2026, only EVs costing £50,000 or more will be liable, as opposed to the current £40,000 threshold, which will remain for other fuel types.
Patrick Gallagher, COO of Addison Lee, said:
“Any positive measure to drive electric vehicle adoption in today’s Budget is undermined by the introduction of a pay-per-mile charge for EVs.
“For taxi and private hire vehicle operators, these 10
new charges, combined with the continued withdrawal of practical incentives, make running EV fleets across the UK increasingly difficult.
“Addison Lee estimates the cost of a pay-per-mile levy would be as high as £840 per year for an EV driver on our fleet, and £420 for a plug-in hybrid driver. This additional charge comes on top of the removal of the congestion charge exemption for EVs in London which increases EV running costs in the capital by as much as £4,700 each year for the average driver.
“Despite being the first private hire operator in London to introduce EVs at scale, flawed policy decisions at national and local level have made it unworkable for us to shift to EVs and have forced us to increase our use of plug-in hybrids to maintain reliable, affordable services. Today’s Budget only puts the UK’s electric dreams even further out of reach.”
James Dow, General Manager UK & IE at Blacklane, the global chauffeur service, said in response to the Budget:
“The new pay-per-mile scheme for electric vehicles risks under-mining efforts to drive greater EV adoption, potentially slowing the shift towards greener choices. This is especially a risk in a city such as London that will also be hit with the removal of exemption for EVs in the Congestion Charge zone from next year.
DECEMBER 2025 PHTM
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