A new electric vehicle tax will begin in April 2028, charging 3p per mile for battery EVs and 1.5p per mile for plug-in hybrids, with rates rising annually with CPI. Rachel Reeves says the Electric Vehicle Excise Duty will align EV drivers with road-use costs, raising £1.1bn in its first year and helping to fund increased road maintenance and additional EV-related grants.
"The average driver of a battery electric car in 2028-29, driving 8,500 miles, is therefore expected to be charged £255 this year. This is roughly equivalent to half the rate of fuel duty tax paid per mile by drivers of petrol and diesel vehicles," says the OBR. The UK's motor retail industry has a target from the UK Government to ensure 52% of all cars sold in 2028 are zero-emission vehicles, typically electric cars.
The OBR notes the charge may dampen EV demand, requiring manufacturers to lower prices or cut non-EV sales to meet the 2028 target of 52% zero-emission sales, forecasting a net reduction of 310,000 EV sales through 2031. Other measures include increasing the VED expensive car threshold to £50,000 for EVs in 2026, expanding the Electric Car Grant to 2030, investing £200m in charge points, extending the temporary 5p fuel duty cut to September 2026, and tightening Motability rules to remove luxury cars from the scheme.
