November 06, 2025 by Iain Reid
The Chancellor Rachel Reeves is planning to announce a new pay-per-mile road tax for electric vehicles (EVs), according to a report in the Daily Telegraph.
The plan is expected to be unveiled in the upcoming Budget on 26 November.
The proposed charge is 3 pence per mile, which would cost the average EV driver an estimated £250 per year. Owners of hybrid cars are also expected to pay the pay-per-mile tax but at a lower rate.
The new tax is intended to plug the financial gap left by falling revenue from fuel duty, as more drivers switch to electric cars (which don’t pay fuel duty).
The government reportedly frames the move as a “matter of fairness,” noting that petrol and diesel drivers pay an average of £600 a year in fuel duty.
If announced, the scheme would undergo a consultation and is not expected to be implemented until 2028.
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The system, nicknamed “VED+”, would likely require drivers to estimate their annual mileage and pay the charge along with their standard VED road tax.
The plan comes on the back of Carwow research which found that motorists were broadly in favour of pay per mile charging as a replacement for the current VED road tax system.
The research found that 49% believe that a pay-per-mile road tax system would be a fairer way to charge motorists than the current Vehicle Excise Duty (VED).
However, with Reeves’ reported plan focussing on just electric cars for pay-per-mile, just over half (51%) think all motorists should pay the same rate per mile, regardless of fuel type, while 28% believe electric-vehicle drivers should pay less to reflect their lower emissions.
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