UK EV Pay-Per-Mile Tax CONFIRMED: How Bad Is It Really?

[00:00:03]In 2024, I bought this used Nissan Leaf, a fully electric vehicle, for just £3,500.

[00:00:10]But, I didn't buy just any Nissan Leaf.

[00:00:13]I deliberately looked for one registered before April 2017, and the reason was road tax. When electric cars lost their road tax exemption, older EVs like mine were placed into the lowest tax band.

[00:00:25]So, while most electric cars registered after the 1st of April 2017 now pay £200 a year, my Leaf currently cost me just £20.

[00:00:35]Therefore, I thought I'd been rather clever.

[00:00:38]But, the government has now confirmed how its new pay-per-mile tax for electric cars will work. From April 2028, electric car owners will pay 3p for every mile they drive, on top of their normal road tax.

[00:00:51]If I drive 8,000 miles a year, that's another £240.

[00:00:56]Using today's rates, my annual vehicle tax bill could effectively rise from £20 to £260.

[00:01:02]While £240 may not sound catastrophic on its own, I think the wider consequences could be significant.

[00:01:09]In this video, I'm going to look at what it means for people who already own an EV, anyone thinking about buying a new one, high-mileage drivers, people who rely on public charging, and what it could do to the wider new and used electric car markets.

[00:01:23]Welcome back to the channel. My name is Sean. So, what has actually been announced?

[00:01:28]The new charge is called electric vehicle excise duty, or EVED.

[00:01:33]It was originally announced in the 2025 budget, and I covered it here.

[00:01:38]But, the government has now published its response to the consultation, giving us much more detail about how it will work.

[00:01:45]It will begin in April 2028.

[00:01:48]Fully electric cars will initially pay 3p per mile, while plug-in hybrids will pay 1.5p per mile. And that The initially is really important, because the following financial year, the charge will start rising with inflation. This also doesn't replace your existing road tax. It is an additional mileage-based charge paid on top of whatever ordinary vehicle excise duty applies to your EV.

[00:02:12]So, it will apply to essentially all UK registered electric and plug-in hybrid cars, regardless of when they were bought.

[00:02:19]Therefore, it affects my cheap older Nissan Leaf. It affects someone who bought an EV several years ago expecting low running costs, and it will affect someone buying a brand new electric car after the tax has already begun. So, there's no way of getting around this now, unless it's an electric van, bus, coach, or HGV, as these will initially remain outside the scheme. But, ordinary electric cars will be firmly in it.

[00:02:43]So, how will it work? Because when people hear pay-per-mile, they imagine every electric car being fitted with a tracker, with the government recording exactly where we drive. Just to be clear, that isn't the system currently being proposed. Instead, when you renew your road tax, you'll submit the current mileage showing on your odometer.

[00:03:03]You'll then estimate how many miles you expect to drive during the following year. The DVLA will then multiply that estimate by the relevant rate and calculate your EVED bill.

[00:03:13]You'll be able to pay annually, every 6 months, or monthly through the existing road tax system. However, pay monthly will attract the same 5% surcharge that applies to monthly VED payments.

[00:03:25]If you realize during the year that you're going to drive more than expected, you'll be able to increase your estimate and make a top-up payment.

[00:03:32]At your next renewal, you'll then submit another mileage reading, and your estimated mileage is reconciled against the distance you actually covered. For cars old enough to need an MOT, the mileage recorded during the MOT will support that verification. The government had originally considered making newer cars attend additional mileage checks before their first MOT, but that idea has now been dropped.

[00:03:55]Instead, owners of those newer vehicles will self-report their mileage with it eventually checked against the mileage recorded at the first MOT.

[00:04:04]The government is also developing an optional system that could allow connected cars to submit mileage automatically. But given the obvious privacy concerns, it is thankfully been confirmed that this will remain voluntary. By the way, if you find straightforward breakdowns of electric cars, home energy, and real-world ownership useful, please consider subscribing so you're among the first to hear about future videos just like this one.

[00:04:27]How much will EV drivers expect pay?

[00:04:30]At 3p per mile, the basic calculation is simple.

[00:04:34]For a low mileage EV owner covering around 3,000 miles a year, £90 probably isn't enough to fundamentally change the financial argument. At 8,000 miles, which is the example I'm using for my Leaf, it becomes £240.

[00:04:48]And for someone commuting long distances and covering 20,000 miles, it becomes £600 every year before adding their normal road tax, charging costs, insurance, and everything else. The government says the 3p rate is around half the 6p per mile that an average petrol or diesel driver pays through fuel duty.

[00:05:08]Therefore, EV drivers should still pay less mileage-based tax than an equivalent petrol or diesel driver.

[00:05:15]What now for current EV drivers?

[00:05:18]For existing owners, the effect depends enormously on how and where you charge.

[00:05:22]If you charge cheaply at home or cover relatively few miles, an EV should still remain inexpensive to run.

[00:05:30]But the tax could become greater than the cost of the electricity itself.

[00:05:34]I currently charge my Leaf at just 3.99p per kilowatt hour during my off-peak period overnight. Depending on efficiency and charging losses, that works out at approximately 1 to 1.3p pences per mile.

[00:05:48]At 8,000 miles, the electricity might therefore cost me somewhere around 80 to 105 pounds for the year.

[00:05:55]I'm not claiming I'll necessarily have that price in 2028, but it demonstrates the strange situation we could reach. My electricity could cost around 100 pounds, while the government's mileage tax could cost 240.

[00:06:08]At these rates, it would cost me twice as much in tax as it would to charge my car.

[00:06:13]And from October 2026, the VAT on domestic electricity will be cut from 5% to zero, making home charging slightly cheaper again.

[00:06:22]Although for now, that reduction is only confirmed until April 2027.

[00:06:27]For someone relying on public charging, the calculation is less favorable again.

[00:06:32]Those drivers already pay more for energy than many people with home charging, but they will still pay the same additional 3 pences per mile.

[00:06:40]Public charging users could therefore feel particularly squeezed, and the government's own consultation acknowledges concerns about their higher existing costs.

[00:06:50]Should you still buy an EV?

[00:06:52]This is where I think the policy could begin to influence the wider market.

[00:06:57]Someone considering a new EV will no longer simply compare the purchase price, charging cost, and servicing against a petrol car.

[00:07:05]They will need to include ordinary road tax, the potential expensive car supplement on qualifying vehicles, and now another 150, 300, or 600 pounds a year, depending on their mileage.

[00:07:18]That doesn't automatically make the EV more expensive overall. A driver charging mainly at home could still save significantly on energy and servicing, but it undoubtedly weakens one of the easiest arguments for buying an EV, that once you bought it, it is extremely cheap to run.

[00:07:35]There is also a psychological difference between paying a few pounds to charge at night, and receiving a separate annual bill based on every mile driven.

[00:07:43]Even where the total cost remains competitive, the new charge may make an EV feel financially less attractive.

[00:07:51]The government's own figures estimate that EVED and the accompanying budget measures could dampen down new EV sales by around 2% compared with what would have otherwise happened.

[00:08:02]It still expects EV sales to grow substantially, but even the official assessment acknowledges some negative effect on demand.

[00:08:10]Used electric cars are already considerably cheaper than many people might expect. My Leaf, for example, only cost £3,500, and there are now many capable used EVs available for a fraction of their original price.

[00:08:24]The new mileage charge could weaken demand slightly if buyers decide the savings are no longer worthwhile. And weak demand could put further downward pressure on used values. That would clearly be bad news for existing owners concerned about depreciation.

[00:08:40]But there is another side to it. As lower used prices can make electric cars more accessible.

[00:08:45]Even with an extra £150 or £300 a year of tax, a cheap used EV could still make excellent financial sense if the purchase price is low and the owner can charge at home.

[00:08:57]So I don't think the EVED will destroy the used EV market, but it could widen the gap between the best and worst EV ownership situations.

[00:09:07]A cheap used EV charged at home and driven a modest mileage could remain incredibly economical. An expensive newer EV used for high mileage and charged mainly on the public network becomes a much more difficult financial calculation.

[00:09:23]There are also three less obvious aspects to the scheme.

[00:09:26]Firstly, miles driven abroad will count.

[00:09:29]If you take a UK registered EV through France or Spain, those miles will still be included because the government has ruled out tracking where journeys take place. It estimates that only around 2% of UK car mileage happens abroad and says excluding it would make the system more complex and intrusive.

[00:09:47]Secondly, if you overestimate your mileage, you won't normally receive the money straight back. The unused mileage will generally be carried forward as credit against the following year.

[00:09:58]Cash refunds at launch will be restricted mainly to certain financial hardship situations, although the government says it tends to expand refunds later.

[00:10:07]And thirdly, plug-in hybrids will pay 1.5 p on every recorded mile, even if some of those miles were powered by petrol and therefore already attracted fuel duty.

[00:10:18]The government says the half rate is intended to recognize this without forcing people to report electric and petrol miles separately.

[00:10:25]So, how bad is the new paper mile EV tax really?

[00:10:29]For low mileage driver with an inexpensive EV and home charging, it is annoying, but probably not enough to overturn the financial benefits of owning and driving an EV.

[00:10:41]For someone driving 15,000 or 20,000 miles, it becomes a substantial additional annual cost. For public charging users, it compounds an already less attractive running cost calculation.

[00:10:52]And for people considering a brand new EV, it weakens the financial incentive at precisely the time the government is trying to increase adoption.

[00:11:02]The key is not to look at the mileage tax in isolation.

[00:11:05]You need to consider the purchase price, depreciation, charging costs, servicing, insurance, standard road tax, and the cost of a petrol or diesel alternative.

[00:11:16]My £3,500 Nissan Leaf should still remain extremely cheap transport overall, but I think the wider concern is what happens after the system has been introduced.

[00:11:27]3 p a mile is the starting rate and it will then rise with inflation.

[00:11:32]Once the mechanism exists, future governments could also decide to change how much drivers pay.

[00:11:38]So, mild leaf purchase hasn't backfired yet, but the era of electric cars enjoying extremely favorable motoring taxes is clearly coming to an end. Let me know in the comments if you're an EV driver what this would cost you based on your annual mileage, and if you're considering an electric vehicle, does this change your decision?

[00:11:58]Thanks as always for watching. Subscribe if you'd like to follow updates on this, and I'll see you in the next one.