The UK is about to tax electric cars by the mile, and the rest of Europe is watching
Governments told everyone to go electric, and now they need a new way to tax it
For years the pitch on electric cars included cheaper running costs, helped along by low taxes. That was always going to be temporary, and the UK has just shown why. From 2028 it will start charging electric cars by the mile, becoming one of the first countries in Europe to do so. It is a very British story for now, but the problem it is trying to solve sits on every finance minister's desk across the continent.
What is actually being introduced
The scheme, an electric vehicle excise duty or eVED, starts in April 2028. Fully electric cars will be charged 3p per mile, and plug-in hybrids 1.5p, with the rates set to rise with inflation from 2029. Hydrogen cars pay the EV rate and range-extenders the hybrid rate, while electric vans, buses and trucks are excluded for now. Drivers will log an odometer reading and estimate their annual mileage when they renew their road tax, paying monthly, six-monthly or yearly, with the figures checked at the annual MOT test.
Why it is happening
The motive is money, plain and simple. As drivers switch from petrol and diesel to electric, the fuel duty that governments rely on quietly evaporates, and the UK Treasury is staring at a forecast 12 billion pound hole in that revenue by the 2030s. A car still uses the roads whether it burns fuel or not, so the logic runs, it should still contribute to their upkeep. To soften the blow, the government says around 80 percent of the money raised in the first three years will be reinvested into charging infrastructure and EV support.
The fleet sector is furious
The loudest objections come from the businesses that run cars in bulk. The BVRLA, which represents the vehicle rental and leasing industry, has branded the plan fleet hostile and estimates it could cost the sector around 260 million pounds a year by 2028, roughly 75 million in pure admin and 185 million in lost productivity from vehicles sitting idle for mileage checks. Some members reckon the real cost of collecting the tax could reach 40 to 45p for every pound it actually raises. The government has already offered concessions, dropping annual mileage checks for newer cars and letting fleets submit estimated readings and bulk payments, but the industry remains deeply unhappy.
AutoNext Take
The uncomfortable truth is that some version of this is coming everywhere, and pretending otherwise helps nobody. Fuel duty is one of the biggest lines in many European budgets, and as it drains away with every petrol car retired, the money has to be found somewhere. Taxing electric cars by the mile is arguably the fairest way to do it, since it charges for road use rather than for the type of fuel. On principle, it is hard to argue with.
The danger is in the timing and the message. Do this while EV adoption is still fragile, and you risk telling hesitant buyers that the moment they switch, the tax breaks that tempted them will start to disappear, exactly the fear the fleet sector is voicing, and something New Zealand has already seen dent its EV sales. Governments across Europe, Belgium and the Netherlands included, will be watching the UK closely, because they all face the same fuel-duty cliff. Get the design right and pay-per-mile is a sensible, modern way to fund the roads. Get it wrong, and it becomes a tax on the very behaviour you spent a decade encouraging.
