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In November 2025, the UK Government announced a significant change to how electric vehicle owners will pay road tax. From April 2028, a new pay-per-mile charge of 3p per mile will be introduced for EV drivers. While the prospect of a new tax might sound daunting, the reality for electric vehicle owners is far more nuanced than the headlines suggest. Here’s what you need to know, and why it doesn’t change the fundamental advantage of going electric.
Why the Change?
The Government faces a genuine fiscal challenge. Fuel duty currently generates around £25 billion annually for the UK Treasury, which is a sum that naturally shrinks as more drivers switch to electric vehicles. With 1.3 million EVs already on UK roads and projections suggesting six million by 2028, a new revenue stream was always going to be necessary.
The pay-per-mile system essentially levels the playing field. Instead of losing billions in fuel duty, the Treasury will collect a distance-based charge that reflects road usage. It’s worth noting that this doesn’t make electric vehicles more expensive; it simply means the tax advantage they’ve enjoyed is narrowing.
How Will It Work?
The system is designed to be simple and privacy-conscious. You won’t be tracked by GPS or sophisticated telematics. Instead, you’ll estimate your annual mileage and prepay your charge alongside your standard Vehicle Excise Duty (VED). At the end of the year, your actual mileage will be verified, which will most likely be during your MOT test. You’ll either receive a credit if you’ve driven fewer miles or pay a top-up charge if you’ve exceeded your estimate.
For context, the average UK driver travels between 8,000 and 10,000 miles annually. At 3p per mile, that translates to around £240-£300 per year.
What’s Already Changed
Before the pay-per-mile charge arrives, several tax changes are already in effect. From April 2025, electric vehicles lost their complete exemption from road tax and now pay the standard rate of £195 per year from the second year of ownership. There’s also an “Expensive Car Supplement” of £410 annually for five years if your EV costs over £40,000. Though the Government has raised this threshold to £50,000 specifically for electric vehicles from April 2026, which helps many popular models like the Tesla Model Y and Hyundai Ioniq 5.
The positive news? Benefit-in-Kind (BiK) rates for company cars remain exceptionally attractive, sitting at just 3% for 2025/26 and rising gradually to 5% by 2027/28. This compares to up to 37% for high-emission petrol cars.
Does It Still Make Financial Sense?
The short answer is yes. Even with the pay-per-mile charge included, electric vehicles remain significantly cheaper to run than their petrol and diesel equivalents.
Consider a typical scenario: A driver covering 10,000 miles annually through a salary sacrifice scheme would face approximately £435 in total annual tax (£195 standard VED plus £300 pay-per-mile). Add home charging costs of around £600-£700 per year, and you’re looking at roughly £1,135 in annual energy and tax costs.
Compare that to a petrol equivalent: The same driver would pay £1,450+ in fuel alone, plus VED, servicing costs, and higher maintenance bills. Electric vehicles typically cost around 50% less to maintain than traditional cars due to fewer moving parts and simpler drivetrains.
For higher-mileage drivers, the advantage grows even more pronounced. The increased mileage charge is offset by the lower per-mile cost of electricity compared to fuel.
Why You Shouldn’t Wait
With implementation not expected until 2028, there’s a crucial window for action. If you order an electric vehicle through a salary sacrifice scheme now, your electric lease agreement will be locked in with current tax treatment. Even when the pay-per-mile charge arrives, existing agreements typically remain unaffected until renewal.
This means you could secure three years of lower-tax EV ownership before the new system kicks in, which is a significant financial advantage worth thousands of pounds.
The Bottom Line
The introduction of a pay-per-mile charge represents the inevitable end of electric vehicle tax exemptions. It’s not surprising news, nor is it a game-changer for EV economics. The fundamental advantages remain intact: dramatically lower fuel costs, reduced maintenance expenses, and compelling salary sacrifice savings for company car drivers.
At cars2buy, we believe this announcement should prompt you to act rather than hesitate. The mathematics of electric vehicle ownership continue to make compelling sense, and with a three-year window before the new tax takes effect, there’s never been a better time to explore your options.
Ready to explore car lease deals? Browse our extensive range of EV options today and discover how much you could save.