From April 2028, electric and plug-in hybrid cars will pay a new tax based on how far they travel. The government confirmed the details of electric Vehicle Excise Duty (eVED) on 13 July 2026, including special arrangements for fleet operators and leasing companies.

If your business runs electric company cars or offers an EV salary sacrifice scheme, eVED is now a cost to plan for. A 48-month contract signed this autumn would run until late 2030, so more than half of it falls under the new tax. This guide explains what eVED costs, who pays it, how fleets will report mileage and what to do before 2028.

For the background on how pay-per-mile works for private drivers, see our earlier guide, pay-per-mile road tax: what this means for you.

What is eVED?

eVED is a mileage-based charge that sits alongside Vehicle Excise Duty (VED), the annual road tax. It starts on 1 April 2028 and will be run by DVLA through the existing VED system (HMRC policy paper, 13 July 2026).

• Fully electric cars (and hydrogen fuel cell cars): 3p per mile.
• Plug-in hybrids (including range extenders): 1.5p per mile.
• Uprating: both rates rise with CPI inflation from 2029/30.
• Vans are out of scope at launch, along with buses, coaches and HGVs. eVED applies to cars only.

The government says the 3p rate is about half the equivalent rate of fuel duty paid by petrol and diesel drivers. Mileage driven abroad in a UK-registered car still counts, and the government has ruled out charging by where people drive (eVED consultation response, GOV.UK).

Separately, the threshold for the VED expensive car supplement rose from £40,000 to £50,000 for zero emission cars from 1 April 2026 (GOV.UK). That helps business buyers of mid-priced EVs, and it is a separate change from eVED.

How much will eVED cost a business car?

The sum is simple: annual miles multiplied by the rate. At the starting rates, a fully electric car covering 10,000 miles a year would pay £300, at 20,000 miles £600, and at 30,000 miles £900. A plug-in hybrid pays half: £150, £300 and £450.

Two things push the real figure up over time. Rates rise with inflation from 2029/30, and paying in instalments by Direct Debit carries a 5% surcharge, as it does for VED today. For most businesses the biggest variable is mileage, so high-mileage roles such as sales and field service will feel eVED most.

Who pays eVED on company, leased and fleet cars?

The registered keeper is legally responsible for giving mileage readings and paying eVED. Who that is depends on how the car is funded.

Cars your business owns

If the business is the registered keeper, it pays eVED directly, in the same way it pays VED now.

Leased company cars

On most contract hire agreements the leasing company is the registered keeper, so it will deal with DVLA. How the cost reaches you is a contract question. The government hasn't set a rule for how lessors pass eVED on, so check how your agreement treats taxes and duties introduced during the term, and ask your leasing provider how it plans to handle eVED on cars that will still be on the road after April 2028.

Salary sacrifice cars

Many salary sacrifice packages include road tax in the monthly payment; AMT's salary sacrifice scheme page lists it as included. Whether eVED will be treated the same way is for each scheme provider to confirm. Employers running a scheme should raise it now, because staff signing up today will be paying through the first years of eVED.

Staff driving their own EVs for work

If employees use their own electric cars for business journeys, they will pay eVED on all their miles, business and private. HMRC's approved mileage rate for cars is 55p a mile for the first 10,000 business miles (25p after that), the same for every fuel type (GOV.UK). Review your mileage policy before 2028 so staff know what they can claim.

How will fleets report mileage and pay eVED?

The original proposals worried the fleet sector, and the BVRLA estimated they would add about £260 million a year in compliance costs (BVRLA, 14 July 2026). The confirmed scheme is simpler for businesses:

• Central mileage estimates. Fleets can submit estimated mileage for their cars instead of relying on each driver. The government expects the estimate, in most cases, to reflect the contracted mileage allowance for the vehicle.
• Bulk licensing and payment. Authorised fleet users will be able to license cars and pay eVED at an aggregate level, through an API for larger fleets or a web service for smaller ones.
• Top-ups. If a car is running ahead of its estimate, you can top up the mileage balance during the year at the rate in force at the time.
• Settling up at disposal. Any outstanding eVED can be settled, or an overpayment refunded, before a car is sold, so liabilities don't follow it to the next keeper.
• Connected car data. Sending mileage directly from a connected car will be possible but optional.

For private keepers, the process works around the VED renewal: an odometer reading plus an estimate for the year ahead, then a reconciliation against the real figure, with mileage recorded at the MOT used as a check. Penalties for not paying will be based on VED penalties, with an extra level for eVED.

Can a business claim eVED as an expense?

Yes, in most cases. The government says businesses will generally be able to deduct eVED as a business expense, in the same way as VED. It also confirmed that the existing VAT treatment of leased cars carries on: businesses normally recover 50% of the VAT on lease rentals, with the other 50% treated as covering private use (eVED consultation response). Your accountant can confirm how this applies to your business.

Does eVED change the case for electric company cars?

It adds a running cost, but it doesn't change the biggest difference between electric and petrol or diesel company cars, which is benefit in kind (BiK) tax. The BiK rate for electric company cars is 4% in 2026/27, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30 (GOV.UK). Petrol and diesel cars can reach 37%. Employers pay Class 1A National Insurance at 15% on the same benefit value, so a lower BiK rate saves the business money too. Our guide to electric company car tax in 2026/27 sets out the rates in full.

Running costs are the other side. HMRC's advisory electricity rates for company cars, from 1 September 2026, are 7p a mile for home charging and 15p a mile for public charging (GOV.UK). eVED adds 3p a mile on top of the energy cost. Whether an EV still works out cheaper overall depends on each car's price, mileage, charging pattern and contract, which is why a whole-life cost comparison is the right tool. AMT's guide to vehicle whole-life costs explains what to include, and the company car tax calculator shows the BiK side for individual cars.

What should businesses do before April 2028?

• Get your mileage data in order. Contracted mileages will become the basis for eVED estimates, so check they match how each car is really used.
• Add eVED to your cost models for any car that will still be on the fleet after April 2028, using a realistic annual mileage and allowing for inflation increases.
• Read your lease and salary sacrifice terms. Look at how new taxes and duties are treated, and ask your provider how eVED will be passed on.
• Update your mileage and expenses policy for staff who drive their own electric cars for work.
• Watch the Budget on 28 October 2026. The Chancellor could change the detail before 2028, and we'll update this guide if that happens.

Planning your next business cars

eVED is 18 months away, and most cars ordered now will still be on the road when it starts. If you're reviewing company cars or vans, AMT's business car leasing team can talk through the options and the running costs to plan for.

This article is general information for businesses, not tax or financial advice. Figures checked on 9 October 2026: HMRC eVED policy paper and consultation response (13 July 2026); BVRLA (14 July 2026); GOV.UK company car tax rates 2028 to 2030 (30 October 2024); GOV.UK advisory fuel rates (updated 21 August 2026); GOV.UK approved mileage rates; GOV.UK expensive car supplement threshold (26 November 2025).

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