Pay-Per-Mile Road Tax: What eVED Means for Your Running Costs

The UK government has just proposed the biggest change to motoring taxation in decades. It’s called eVED — electric Vehicle Excise Duty — and it will charge electric vehicle drivers a per-mile tax for the first time. The consultation closes on 18 March 2026. Here’s what it means for your running costs, and how to have your say before the deadline.

What Is eVED?

eVED is a new mileage-based road tax for electric and plug-in hybrid vehicles. Instead of the flat annual VED rate that petrol and diesel drivers pay, EV owners will be charged per mile driven.

The proposed rates are straightforward:

• Fully electric vehicles (BEVs) — 3p per mile
• Plug-in hybrids (PHEVs) — 1.5p per mile

At average UK annual mileage of 10,000 miles, that works out to £300 per year for a pure EV and £150 per year for a plug-in hybrid. These charges come on top of the standard VED rate that EVs already pay following the April 2026 road tax changes.

The Tax Comparison

The headline numbers tell an important story. Even with eVED, electric vehicle drivers will still pay significantly less in mileage-based tax than petrol drivers pay through fuel duty.

At 3p per mile, EV drivers will pay less than half what petrol drivers contribute through fuel duty. That’s a deliberate choice — the government wants to keep the financial incentive to go electric. But the days of paying zero road-usage tax on an EV are coming to an end.

Why Is This Happening?

Fuel duty currently brings in approximately £25 billion per year for the Treasury. That revenue funds roads, public services, and a significant chunk of government spending. As EVs replace petrol and diesel cars, that revenue stream is drying up.

The government’s own projections show that if the EV transition continues at the current pace, fuel duty receipts could fall by £10 billion or more within a decade. eVED is designed to fill that gap — ensuring EV drivers contribute to road maintenance and infrastructure, just as petrol and diesel drivers do through fuel duty.

The principle is sound: everyone who uses the roads should help pay for them. The question is whether the detail is right.

The Timeline

How It Works: No Trackers Required

One of the biggest concerns people have is surveillance. Will the government track where you drive? The answer is no. The proposed system uses self-reported odometer readings, similar to the mileage declarations you already make for car insurance.

Here’s how it will work in practice:

• Drivers report their mileage annually (or the reading is taken at MOT)
• No GPS tracking, no black boxes, no real-time monitoring
• The system mirrors how insurance companies already verify mileage
• Dealers can pre-pay miles and bundle them into purchase or lease deals, simplifying the process for new buyers

The pre-paid mileage option is particularly interesting for leasing. It means monthly payments could include your eVED allocation, making the cost predictable and invisible — much like road tax is already bundled into many PCP finance deals today.

Impact on Total Running Costs

eVED doesn’t exist in isolation. To understand what it really means, you need to look at total running costs — and that picture is more nuanced than either side of the debate admits.

For an EV driver charging at home on an off-peak tariff, the maths still works out strongly in their favour. At 3–5p per mile in electricity plus 3p per mile in eVED, total energy and tax costs come to roughly 6–8p per mile. A petrol driver paying 14–19p per mile (fuel plus duty) is still paying significantly more.

But the “free ride” is ending. Before eVED, home-charging EV drivers paid as little as 2–5p per mile with zero road-usage tax on top. That extraordinary cost advantage is being narrowed by design.

Winners and Losers

eVED will affect different drivers very differently. Where you charge and how far you drive determines whether this is a minor line item or a meaningful hit to your budget.

The Double Squeeze: eVED Meets the Charging Price Trap

For drivers who rely on public charging, eVED arrives at the worst possible time. As we covered in our piece on the EV charging price trap, public rapid charging already costs more per mile than petrol — up to 24p per mile at pay-as-you-go rates.

This is the group the government needs to think hardest about. Around 36% of UK households lack off-street parking. These drivers can’t plug in at home, have no access to cheap overnight electricity, and are already paying a premium to charge publicly. Adding a per-mile tax on top makes the economics of EV ownership genuinely difficult to justify for this group.

How eVED Compares to Fuel Duty

It’s worth putting the numbers in direct context. A petrol driver filling up a car that does 40 mpg currently pays roughly 7–8p per mile in fuel duty and VAT on that duty. That’s before the cost of the fuel itself.

An EV driver under eVED will pay 3p per mile — less than half the tax contribution of a petrol driver. A PHEV driver at 1.5p per mile pays less than a quarter.

So while eVED is new money out of EV drivers’ pockets, the rates are set well below petrol parity. The government is clearly trying to balance two things: raising revenue and not killing the EV transition. Whether they’ve got that balance right is exactly what the consultation is there to determine.

What This Means for Petrol and Diesel Drivers

If you drive a petrol or diesel car, eVED doesn’t change your costs directly. You’ll continue paying fuel duty at the pump as before. But the policy signals something important about the long-term direction of travel.

The government is building the infrastructure for mileage-based taxation. Today it applies to EVs only. But the framework — odometer readings, pre-paid miles, annual declarations — could eventually replace fuel duty for all vehicles. If that happens, how much you drive will matter more than what you drive.

For now, with petrol still cheaper to run than public-charged EVs for many drivers, the immediate incentive to switch is weaker than the government would like. eVED doesn’t help with that messaging.

The Bottom Line

eVED is coming. It’s fair in principle — everyone who uses the roads should pay towards their upkeep, regardless of what powers their car. At 3p per mile, the rate is modest compared to the 7–8p petrol drivers already pay in fuel duty. For most home-charging EV owners, it’s an affordable addition to still-cheap running costs.

But the detail matters enormously. High-mileage drivers face bills of £600 or more. Drivers without home charging are being squeezed from both sides — expensive public charging and a new per-mile tax. Rural communities with no choice but to drive long distances will feel this more than city dwellers.

The consultation closes on 18 March 2026. If you have views on the rates, the exemptions, or the impact on different types of drivers, now is the time to make them heard. This policy will shape the cost of driving in Britain for decades to come.

Whatever you drive today, use Fuelwise to compare fuel prices near you. Every penny per litre saved at the pump is money back in your pocket — and that’s one thing no policy change can take away from you.