In the 2025 Autumn Budget, the UK Government confirmed a major shake-up in how electric vehicles (EVs) will be taxed from April 2028. Alongside changes to fuel duty and other motoring taxes, a new pay-per-mile tax was announced, officially called Electric Vehicle Excise Duty (eVED), which will apply to battery electric vehicles (BEVs), hydrogen fuel cell vehicles (HFCEVs), and plug-in hybrids (PHEVs).
This change is one of the most significant developments affecting fleets and running-cost strategies, and it deserves focused attention for anyone managing EVs now or planning how to prepare for the EV transition.
What is the pay-per-mile tax (eVED)?
As a business owner with a fleet, you may be asking, ‘What is the pay-per-mile tax?’
Well, this new scheme means:
BEVs and HFCEVs will be charged 3p per mile driven.
PHEVs will pay 1.5p per mile.
These charges are in addition to the existing Vehicle Excise Duty (VED) and must be paid every year.
The idea behind eVED is to compensate for the revenue the Treasury is losing from falling fuel duty receipts as drivers move away from petrol and diesel.
How it will work in practice
Rather than being taken at the pump like fuel duty, the pay-per-mile tax will require EV owners, fleet operators, and employees on an EV salary sacrifice scheme to estimate their annual mileage and pay the charge upfront, alongside their standard VED.
At the end of the year, actual mileage will be reported (typically checked against MOT records or similar verification), and any difference will be reconciled.
This means accurate tracking and forecasting become part of fleet administration, something that wasn’t previously required for pure electric vehicles.
What is the estimated cost impact?
For business owners wondering how much per mile an electric car will cost under the new system, the estimated costs are broken down below:
An average EV driving around 8,500–9,000 miles per year could pay roughly £255-£280 annually in eVED charges alone.
This cost is around half of what a petrol or diesel vehicle would pay in fuel duty for the same mileage, but it still represents a new tax burden that didn’t exist before.
For larger fleets, this scales quickly:
Fleet Type | Annual Mileage (per vehicle) | eVED Cost (3p/mile) |
Urban/Local | 6,000 miles | £180 |
Sales/Service | 12,000 miles | £360 |
High-Use | 20,000 miles | £600 |
These figures sit on top of VED and any existing costs, meaning total running costs need to be recalculated for electrified fleets. EV charge cards can help businesses manage charging costs more efficiently as they make the transition over to electric fleets.
Why this matters for fleet operators
Total Cost of Ownership (TCO) Changes
EVs were already attractive due to lower fuel costs and maintenance savings. With eVED, those savings shrink, particularly for high-mileage vehicles. Fleets that once saw clear financial gains from electrification now need to factor a recurring mileage tax into their TCO models.
Budgeting & Cash Flow
Unlike fuel duty (which is paid as fuel is bought), eVED requires upfront payment and reconciliation, which affects budgeting, cash flow planning, and admin overhead. Forecast accuracy becomes essential.
Route and Asset Optimisation
High-mileage vehicles are the most affected. Fleets might re-evaluate whether certain routes or roles are still best served by EVs, or whether a mixed model performs better financially.
Sales & Replacement Strategy
Vehicles acquired before April 2028 will begin to incur eVED partway through their lives. This can shift replacement cycles or depreciation expectations.
What about the Government’s rationale?
The Government argues that as petrol and diesel revenues decline, all road users should contribute fairly to road upkeep, and a mileage-based charge is seen as a more equitable way to fund infrastructure.
However, some industry voices warn it could slow EV adoption and affect long-term net-zero goals, since it increases the lifetime cost of battery vehicles.
Looking ahead - planning & preparation
For fleets already electrified or planning the transition:
Audit projected mileage across your fleet and model potential eVED costs.
Integrate mileage forecasting into vehicle procurement and budgeting.
Consider fleet telematics or mileage tracking tools to support accurate reporting.
Review whether EVs still make sense for high-use roles where running costs might now favour alternative technologies.
Electric vehicles will continue to offer benefits, but the simple narrative of “lower running costs forever” is changing. Before you make any decisions, it’s best to weigh up the pros and cons of electric vehicles first.
Take the time to review your fleet data and future costs by using our savings calculator – it could make a real difference when the new tax comes into force. To get a full understanding of the fees drivers pay on the roads, read our full UK car tax guide.
