Electric vehicle uptake has risen drastically, with around 465,000 new EV registrations in 2025 alone. Compared to the total of just over 2 million total new car sales, that gives EVs a market share of around 23%, which is up from 18% in 2024. This is no doubt encouraged by all of the incentives that come with owning an EV, such as; extremely low running costs; Government Grants providing discounts on the cost of new EVs and home charger installations; and the excellent tax advantages for businesses running an EV fleet.

So far, one of the reasons that EVs have been so cheap to run is that they don't pay fuel duty on the electric when they're charging. Currently, petrol and diesel owners pay around 53p of fuel duty per litre when refuelling, which generates billions for the Government each year. With the amount of EVs on the road growing every single day, it's clear to see that the money generated from fuel duty will start to dwindle without a new system in place for EVs.

What is going to change?

Unfortunately, all good things must come to an end (or become a little less good, in this case). From April 2028, the Government will be introducing a new system for EV and Plug-in Hybrid (PHEV) drivers. Designed to replace some of the fuel duty the treasury is losing as more people adopt electric vehicles, for drivers of a pure EV car, they will pay a 3p tax for every mile they drive, Plug-in Hybrid owners get half of this, having to pay just 1.5p per mile. The charge is planned to increase each year in line with inflation, similarly to how fuel duty currently does.

Right now, this charge is only intended for cars that need to plug in to charge, so if you're currently (or thinking about) driving a hybrid car that doesn't need to be plugged in, then you don't need to worry about this new tax.

As of yet, the Government hasn't said how this is going to be enforced, but it is expected that you will estimate how many miles you will drive in a year, and this will likely be checked during your MOT or service. If the actual mileage is higher or lower than what you estimated, then this difference could be added/deducted from your next bill. Another possible way is for your odometer to be checked at an MOT first, and then payment would be required for your driven miles. There currently isn't any proposals for GPS tracking or real-time monitoring (like a black box) for eligible vehicles, which is great news as it would likely face substantial backlash if this was suggested.

For brand new cars that don't need an MOT for 3 years, and might not need a service for 2 years, it's anybody's guess how they're going to enforce this. The Government is yet to come back with an answer for this, as this will likely be a very common scenario for many drivers.

What does this mean in pounds and pence?

Simply saying 3p per mile doesn't really mean much to most people, but let's take a look at what this might actually mean in terms of your tax bill. I'll go over a few different mileages and what the cost would be each year. The average annual mileage in the UK is roughly 7,500 miles, but like most things, it depends on many different factors, so you may drive more or your may drive less.

5,000 miles per year

• EV: £150
• PHEV: £75

7,500 miles per year

• EV: £225
• PHEV: £112.50

10,000 miles per year

• EV: £300
• PHEV: £150

15,000 miles per year

• EV: £450
• PHEV: £225

Will EVs still be cheaper to run?

The short answer is; yes! Whilst this new tax might seem like a punishment for driving an eco-friendly way, it still works out to be a much cheaper way to drive compared to an internal combustion engine (ICE) car. The key reasons for this are:

• Electricity, especially when charged at home on off-peak tariffs (which can be as low as 7p per kWh), remains significantly cheaper per mile than petrol or diesel.
• EVs have far fewer moving parts, so servicing and maintenance costs are often lower over the vehicle's life.

Adding a 3p per mile tax does narrow the cost-savings gap a little, but it doesn't eliminate it altogether. Assuming you're driving the annual average of 7,500 miles, the extra £225 per year still makes an EV much cheaper to run compared to a petrol or diesel vehicle. For PHEVs, the picture is a little bit more mixed, if you regularly use your electric-only range, you'll still be seeing great savings compared to a petrol/diesel vehicle, but if you rarely charge and mostly rely on the engine, you may see less benefit as you'll be paying both fuel duty and this new pay per mile tax. Even if you don't regularly charge your PHEV, it will still generate electric itself, and will be more fuel efficient to run.

To make things a little clearer, let's compare the running costs of an EV, a PHEV, and a petrol/diesel vehicle over a year.

Some assumptions:

• EVs and PHEVs have an efficiency of 3 miles per kWh, which is around average.
• EVs and PHEVs charge at a cost of 7p per kWh, which roughly translates to 2.33p per mile.
• PHEVs drive on electric 50% of the time, and petrol/diesel 50% of the time.
• Cars running on petrol/diesel cost 15p per mile (a realistic 2025 guide, which includes fuel duty).
• All cars are driving 7,500 miles over a year.

Electric Vehicles

• Energy cost: 7,500 x 2.33p ≈ £174.75
• New per-mile tax: 7,500 x 3p = £225
• Total: ≈ £399.75

Plug-in Hybrid (PHEV)

• Electric half: 3,750 x 2.33p ≈ £87.38
• Petrol half: 3,750 x 15p ≈ £562.50
• Total fuel cost: ≈ £649.88
• New per-mile tax: 7,500 x 1.5p = £112.50
• Total: ≈ £762.38

Petrol/Diesel (ICE)

• Fuel cost: 7,500 x 15p ≈ £1,125
• Total: = £1,125

Now, this working out is based on averages, so your mileage really will vary (pun very much intended). But it's a great way to see that these charges, whilst they're certainly a sting to those that are used to the incentives of EVs, are still a much cheaper way to drive. From the example above, running an EV still only cost around a 3rd of that of a petrol/diesel vehicle. Depending on the cars you compare to, the savings could be even more. For PHEV drivers, it really does depend on how much you're using electric-only driving, the more you do, the more you'll save.

The impact on fleets and company cars

Fleet owners and company car drivers now need to think about the tax benefits a little differently from private, low-mileage users. Obviously, high-mileage business drivers will see the biggest increase in annual tax, purely because they cover more miles. Although, these are usually the drivers that benefit the most from EVs low running costs and favourable Benefit-in-Kind rates, so EVs will still remain very competitive, even when considering these new charges.

HMRC has also updated the advisory electricity rates for reimbursing EV business mileage, distinguishing between home an public charging. Businesses should review their reimbursement policies and whole-life cost models, building in both the per-mile charge from 2028 and the latest advisory rates.

Will the new tax slow down EV adoption?

This part is purely speculative, but from my point-of-view, I think it will have a bit of an effect. EVs do, on average, cost more to buy/lease compared to ICE vehicles, and to get the most savings on fuel, you'd also need a home-charger installed. Whilst there are grants available to help offset both of these costs, they are still things to be considered, and now that the cost-savings of an EV (and PHEV) are slightly lower, the 'return-on-investment' will take a little longer to achieve, so I firmly believe there are some that may opt for another type of vehicle instead, as they might not be able to bear some of the upfront costs associated with an EV, and might instead look at other options.

For the Government to keep up the appeal of EVs, they need to really push the message that EVs are still far cheaper to run, and that this new per-mile charge isn't a punishment, but merely bringing them into the mainstream vehicle tax system. The Government is still investing heavily in charging infrastructure, and drivers will still enjoy lower taxes for an EV compared to ICE vehicles.

What does this all mean?

All in all, it means that from April 2028, EVs and PHEVs will still be great vehicles that cost less to run, but the savings gap is going to close a little. Whilst the incentives to get an EV have been pretty good, I think we all knew that they would eventually start to slow down a little. Much of the incentives for EVs started for a number of reasons, mostly as they are much better for the environment, but also partly because they are a bigger investment, and for a while, EVs weren't as capable as many ICE cars. Now that gap is closing, and EVs often outperform ICE cars, even the world's fastest car is electric. Now that they're becoming more mainstream and more popular, the Government needs to find a way to recoup some of the money they're losing from fuel duty as well.

If you're looking for a new EV or PHEV, they're still fantastic for saving money in the long run, even with the proposed changes. Whether you're looking to Rent, Subscribe, Lease, or Buy one, we've got something for you.