Pay-per-mile road car tax: what you need to know for 2025 and beyond
Find out what pay-per-mile tax is, how it works & why it's been suggested. Read our guide to learn more on the latest 2025 speculation.
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Key takeaways from this article:
Pay-per-mile tax could start in 2028 (after consultation from November 2025)
It could cost EV drivers 3p per mile in additional tax for all drives
Hybrids are also likely to be included at a lower rate
This represents an extra £240/year at 8,000 miles per year
A shortfall in fuel pump taxes has prompted the EV tax
New Zealand has already introduced a similar scheme
Mileage-based tax for all cars could come to the Netherlands by 2030
Industry experts worry it could disincentivise EV ownership
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What is pay-per-mile?
A pay-per-mile road tax for electric vehicles (EVs) could be announced in the November 2025 Autumn Budget, aiming to tackle falling fuel duty revenue as more drivers switch to electric vehicles (EVs).
EVs are predicted to be subject to a 3p per mile charge from 2028, with hybrids also included in the pay-per-mile scheme, although at a lower rate.
This comes as the motor industry anticipates six million EV owners by 2028, up from 1.6 million today.
Transport ministers are reportedly planning to introduce this new usage-based scheme to recoup lost tax revenue from falling numbers of petrol and diesel cars, and create ‘a fairer system for all drivers’.
Current speculation suggests this would come on top of the Vehicle Excise Duty (VED), which EV drivers started paying for the first time from April 2025.
Will you pay more?
Those covering 8,000 miles per year could expect to pay an additional £240 per year in tax if the 3p/mile system is introduced. This would rise to £360 for 12,000 miles per year.
Here’s how much it could cost for popular long-distance UK trips from London:
London to Manchester - £6.30
London to Edinburgh - £12.30
London to Cardiff - £4.50
In comparison, the Telegraph reports that the average petrol car owner pays around £600 each year in fuel duty, which is the ‘equivalent’ scheme for combustion engine cars.
How would pay-per-mile be checked?
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It’s unclear how mileage would be tracked as part of a pay-per-mile scheme, but reports suggest the DVLA will oversee it.
Drivers might have to declare their estimated mileage each year, or mileage could be checked at each car’s annual MOT.
‘Black box’ telemetrics (similar to what’s used for some car insurance policies) or GPS-based surveillance aren’t expected.
Why is pay-per-mile being considered?
Using a pay-per-mile system would generate some income to cover the expected drop in tax revenue as more drivers switch to electric or hybrid.
It may also incentivise drivers not to make unnecessary trips, helping to reduce congestion.
When could pay-per-mile happen?
Chancellor Rachel Reeves could announce a pay-per-mile taxation scheme for EVs in the November 2025 Autumn Budget on 26 November, but it wouldn’t take immediate effect.
The proposal would be subject to consultation and could be enforced from 2028.
How has the industry reacted to the proposed pay-per-mile tax?
The UK's leading trade association for the automotive industry, SMMT, wrote: “Introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake – deterring consumers and further undermining industry’s ability to meet ZEV mandate targets, with significant ramifications for perceptions of the UK as a place to invest.”
Do any other countries have similar pay-per-mile schemes?
New Zealand taxes its diesel cars on a per-mile basis at a rate of around 5p per mile, and as of April 2024, EVs pay the same.
“This means that these vehicles will now be contributing towards the maintenance and upkeep of our roading system like all other road users,” Hon Simeon Brown wrote.
Plug-in hybrids pay a reduced rate (NZ$53/£23 per 1,000km), but they also pay annual Road User Charges (RUC) similar to our VED on top of that to cover their petrol consumption.
The Netherlands has also set out plans to replace traditional road tax with a per-kilometre charge, estimated to be around 6-7p per kilometre. This would apply to all fuel types, including EVs.