UK Pay-Per-Mile Tax for Electric Cars: Costs, Timeline and Industry Impact (2025 – 2028)
22.12.2025
6 mins to read
Electric vehicles have played a crucial role in the UK’s transition to lower-emission transportation. For years, tax breaks and incentives helped push EV adoption forward. In 2025, that approach began to change. The government has confirmed plans to introduce a pay-per-mile charge for electric vehicles, linking how much drivers pay directly to how far they travel. The proposal aims to replace falling fuel-duty revenues, but it has also sparked concern across the automotive industry. Will this policy slow the shift to electric cars? Could it influence buying decisions? What might it mean for garages, mechanics and bodyshops? Using the latest government data and industry reactions, this article explores what the UK pay-per-mile tax really means for the automotive sector in 2025 and beyond.
An announcement: EV car drivers will pay road tax from 2028
In the 2025 Autumn Budget, the government drew a clear line under years of preferential treatment for electric vehicles. From April 2028, EV owners will begin paying for road use by the mile. Battery-electric cars will be charged 3p per mile, while plug-in hybrids will pay 1.5p. The aim is straightforward: as petrol and diesel sales decline, fuel-duty income is falling with them, and the Treasury needs a replacement that reflects how roads are actually used. Alongside the new charge, the UK government launched a formal consultation on how mileage will be recorded and enforced, with proposals still open for feedback. Officials have stressed that the system will be phased in gradually, but the message is already clear: electric driving is moving from incentive-led support to a usage-based model.
How much will electric car drivers pay?
To understand what the pay-per-mile policy really means in practice, it helps to step away from headlines and look at the numbers. The government’s own forecasts and Budget documents outline how the charge will work, how much it is expected to raise, and what it could cost the average EV driver. The table below brings those key figures together in one place.
| Item | Figure (headline) |
| EV per-mile rate (from Apr 2028) | 3p per mile (battery electric) |
| PHEV per-mile rate | 1.5p per mile |
| OBR revenue estimate (2028–29) | ~£1.1bn |
| Typical annual cost for 8,500 miles | ~£255 (2028–29) |
Why the Treasury says it is necessary
From the Treasury’s perspective, the challenge is less about electric vehicles themselves and more about a funding gap that is growing every year. Fuel duty has long been one of the government’s most reliable revenue streams, contributing tens of billions annually to public finances. As drivers switch from petrol and diesel to electric vehicles, that revenue is projected to decline sharply over the coming decade.
Official forecasts underline the scale of the issue. The Office for Budget Responsibility warns that rising EV adoption will create a growing shortfall in fuel-duty receipts unless an alternative mechanism is introduced. The pay-per-mile proposal is therefore framed as a structural fix, designed to link road funding directly to vehicle usage rather than fuel type. Ministers argue that acting now allows the transition to be managed gradually, rather than forcing a more abrupt and disruptive new tax overhaul later on.
The EVS industry reacts and pushes back
Major industry and motoring groups responded quickly and critically. The Society of Motor Manufacturers and Traders (SMMT) called the timing ‘entirely the wrong measure at the wrong time,’ warning it could deter buyers and undermine manufacturers’ ability to meet zero-emission sales targets. The RAC noted that implementation details will matter and cautioned that the charge could slow the transition to EVs, while also pointing out the unfairness faced by drivers who rely on public (and more expensive) charging. Manufacturers such as Ford echoed concerns that the budget sends a ‘confusing message’ to consumers and could hinder compliance with ZEV targets.
Will pay-per-mile tax slow EV uptake?
The short answer is: yes, it could, according to official modelling. The OBR flags that behaviour changes, like higher ownership costs, will reduce EV sales versus a baseline, estimating around 440,000 fewer EVs on the road across the forecast period without offsetting measures. The government attempts to offset this with expanded grants and infrastructure funding, but both industry bodies and independent analysts warn that a new annual cost (even modest) changes purchase calculus for some buyers.
Could this change life for mechanics and bodyshops in the UK?
Yes, but not overnight. The likely route is indirect: slower EV uptake would keep a higher share of ICE vehicles on the road for longer, meaning demand for traditional mechanical skills and bodywork could remain stronger than previously forecasted. Conversely, if EV rates still rise, garages will need to accelerate EV-specific training. The industry’s mixed reaction reflects this tension. The manufacturers worry about demand. The repair networks are cautious but see more time to adapt.
Will electric vehicle specialists be needed? Quick checklist for workshops.
For workshops and repair centres, the pay-per-mile debate is more than a political discussion. It has practical consequences. While the policy may take years to fully play out, garages can already take steps to protect their position, respond to shifting demand and stay competitive as the market adjusts. What actions should they take?
- Upskill technicians now on high-voltage systems and diagnostics; demand for EV training will persist irrespective of small shifts in sales.
- Monitor local demand patterns: some regions may see slower EV adoption and continued ICE work; others will keep electrifying fast.
- Prepare commercial offers that bundle servicing, checks and smart-charging advice to capture owner loyalty during a potentially uncertain sales period.
Final take: pay-per-mile road tax is a pain or is it beneficial?
The pay-per-mile proposal marks a clear shift in how electric driving will be treated in the UK. EVs are no longer protected by incentives alone. They are being folded into a wider road-use system. Whether this slows adoption depends on execution. Poor design could unsettle buyers, while clear rules and balanced costs can help limit the damage. The stakes are high, and the margin for error is small. For the automotive industry, the message is straightforward. Change is coming, but it will not be instant. Workshops that invest in EV capability now will be better placed, whatever the pace of adoption. Those who wait may find themselves reacting too late. One thing is certain: how far you drive is about to matter as much as what you drive.
Sources:
https://obr.uk/docs/dlm_uploads/OBR_Economic_and_fiscal_outlook_November_2025.pdf
https://www.smmt.co.uk/smmt-statement-on-pay-per-mile-electric-vehicle-tax/
https://media.rac.co.uk/autumn-budget-2025-fuel-duty-to-increase-and-pay-per-mile-tax-introduced
