The Impending UK Road Tax Revolution

The Impending UK Road Tax Revolution: How “Pay-Per-Mile” Affects Your Commute in the UK – Losses and Gains

Picture this: You’re glancing at your monthly fuel or charging bill, wondering why the cost of getting to work feels like it’s creeping up again. For years, we’ve grown used to the familiar annual Vehicle Excise Duty (VED) – that flat road tax disc – but the ground is shifting under our wheels. As of early 2026, the conversation around motoring taxation has never been more heated, thanks to the government’s push to address the hole in fuel duty revenue as electric vehicles (EVs) become mainstream.

In the Autumn Budget 2025 (delivered in late 2024 but with measures rolling out through 2025-2028), the Chancellor confirmed a major change on the horizon: from April 2028, electric and plug-in hybrid vehicles will face Electric Vehicle Excise Duty (eVED) – effectively a self-reported pay-per-mile charge. This isn’t the full national “pay-per-mile” road pricing scheme some feared (with GPS tracking and variable rates for congestion or time of day), but it’s a significant first step. Average EV drivers could face around £240 per year (roughly £20 per month) based on typical mileage, roughly half the equivalent fuel duty petrol/diesel drivers pay today.

Why does this matter to you as a commuter, employee, self-employed tradesperson, or business owner? Because your daily drive – whether it’s zipping down the M25, rural rounds in the Cotswolds, or city centre deliveries – is about to be taxed differently. For some, it’s a fairer system that levels the playing field; for others, especially high-mileage users, it could mean real losses.

Current Motoring Taxation Landscape in 2025/26

Let’s start with where we stand right now in the 2025/26 tax year (running to 5 April 2026). VED rates were uprated with inflation, and EVs lost their full exemption from April 2025. Most petrol/diesel cars registered after 2017 pay the standard rate of £195 annually (up from previous years due to RPI alignment). First-year rates for new cars vary wildly by emissions – £10 for zero-emission vehicles, soaring to over £5,000 for high-polluters.

The expensive car supplement (that extra £425+ for cars over £40,000 list price) was raised to £50,000 for zero-emission cars from April 2026, a small but welcome relief for mid-range EV buyers. Fuel duty remains at the reduced 52.95p per litre (with the 5p cut extended to August 2026), but it will gradually rise back to pre-2022 levels by March 2027.

According to HMRC and DVLA data cross-referenced with Treasury forecasts, fuel duty brought in around £24-25 billion in recent years, but as EV adoption grows (over 1 million on roads by mid-2025), that figure is projected to halve by the 2030s. eVED is the government’s initial response – a modest mileage-based levy for EVs/PHEVs only, self-reported via odometer readings, no trackers required initially. Vans, HGVs, motorcycles, and buses are out of scope for now.

Who Wins and Who Loses in the Short Term (2026-2028)

Be honest – none of us loves tax surprises, but here’s how this plays out before the full 2028 shift.

Winners in the transition:

• Low-mileage EV drivers (under 8,000 miles/year) might pay less overall than equivalent petrol costs, especially with home charging at 4-7p per mile versus petrol’s 15p+ including duty.
• Those who bought expensive EVs between April 2025 and early 2026 benefit from the retrospective ECS threshold rise to £50,000 – potentially saving £425+ annually.
• Businesses with EV fleets continue enjoying 100% first-year capital allowances (extended to March/April 2027) and business rates relief for chargepoints.

Losers:

• High-mileage commuters (sales reps, delivery drivers, rural self-employed) will feel the pinch sooner if they switch to EV before 2028, as flat VED gives way to mileage-based costs.
• Petrol/diesel drivers see no immediate relief – fuel duty creep-back adds pressure, with average households facing £89 extra in 2026/27 compared to prior plans.

From my 18+ years advising clients across London, Manchester, and rural Scotland, I’ve seen this pattern before: early adopters celebrate savings, but practical high-users (think plumbers doing 20,000+ miles) often regret switching too soon without running the numbers.

How Pay-Per-Mile Could Reshape Your Commute Costs

Now, let’s think about your situation specifically. If you’re an employee with a 15-mile each-way commute (about 7,500 miles annually assuming 250 working days), the proposed eVED at roughly 3p per mile (government estimates peg average at £240 for typical usage) adds around £225 yearly from 2028 – not catastrophic, but noticeable when added to charging costs.

Compare that to a self-employed courier doing 30,000 miles: potential £900+ bill, versus current flat £195 VED. That’s a real hit unless offset by other savings (no fuel duty, lower maintenance).

Practical Calculation: Your Potential Exposure

Here’s a simple table to estimate your position (based on Budget 2025 figures and typical assumptions; always verify with DVLA guidance).

Annual Mileage	Vehicle Type (from 2028)	Estimated eVED Cost	Equivalent Petrol Fuel Duty (approx.)	Net Gain/Loss vs Current System
5,000	EV	£150	N/A (no fuel duty)	Gain (cheaper than petrol equivalent)
10,000	EV	£240-300	£500-900 (fuel duty portion)	Clear gain
15,000	PHEV (partial electric)	£300-450	£700-1,200	Modest gain
25,000+	EV	£600+	£1,200+	Potential loss if high mileage

These are ballparks – the government consultation (open until March 2026) will refine rates, but expect around half the petrol/diesel equivalent per mile to maintain revenue neutrality.

Business Owners: Deductibility and Planning Ahead

If you run a limited company or are self-employed, this is where it gets interesting. Mileage-based charges could be treated as a business expense (similar to current VED/fuel), deductible against profits for Income Tax and Class 4 NICs. But careful record-keeping is essential – odometer photos, business vs private mileage logs.

In my practice, I’ve helped clients restructure fleets: one Manchester-based delivery firm switched to EVs in 2024, saving thousands on fuel, but we modelled the 2028 eVED impact early. Result? They capped mileage allowances for drivers and invested in route optimisation software – turning a potential loss into a competitive edge.

For sole traders, don’t forget mileage allowances (45p per mile for first 10,000 business miles, 25p thereafter) remain a powerful tool. If eVED becomes payable, you might claim it as an additional running cost – but HMRC will scrutinise claims more closely.

Scottish and Welsh Variations – Don’t Assume Uniformity

Devolved administrations add complexity. Scotland has different income tax bands (affecting net take-home if you’re funding motoring costs), but VED remains UK-wide (reserved to Westminster). Welsh rules mirror England for most motoring taxes, but watch for any future devolved tweaks to congestion-style charges.

Anecdote from the Desk: A Client’s Wake-Up Call

I remember advising a client – let’s call him David, a self-employed IT consultant from Birmingham – who bought an EV in 2023 to “future-proof” against fuel rises. Great decision initially, but when we sat down in late 2025 to forecast 2028+, he realised his 22,000-mile annual average would push his effective tax up by £400-500 versus staying petrol. We recalculated: by keeping detailed logs and maximising allowable deductions, he offset most of it. Moral? Plan early – don’t wait for the bill to land.

Preparing for 2028: Actionable Steps for 2026

None of us wants to be caught out, so here’s what I recommend right now:

1. Log your mileage religiously – use apps or a simple spreadsheet. Note business vs private splits.
2. Review your vehicle’s registration date and list price – if you’re in the £40-50k EV bracket, confirm ECS relief applies from April 2026.
3. Model scenarios – use online VED calculators on GOV.UK and add a hypothetical 2-4p per mile for future eVED.
4. Consider timing your next vehicle purchase – pre-2028 EVs might still offer advantages before full mileage charging bites.
5. For businesses, speak to your accountant about fleet reviews – capital allowances for chargepoints remain generous until 2027.

The “revolution” isn’t here yet – 2028 is still two years away – but the direction is clear. For low-mileage urban commuters, it’s likely gains; for rural or high-mileage users, potential losses unless offset smartly.

Deeper Dive: The Mechanics of eVED and How It Will Actually Work

So, the big question on your mind might be: how exactly will this new Electric Vehicle Excise Duty (eVED) operate day-to-day? The government has been clear that it wants to keep things simple and privacy-focused—no mandatory GPS trackers, no congestion-zone-style variable pricing based on time or location. Instead, it’s built around the existing Vehicle Excise Duty (VED) renewal process.

From April 2028, when you renew your VED (usually annually via the DVLA online or post), you’ll provide an estimate of the miles you expect to drive in the coming year. You pay upfront: the standard VED rate (currently projected around £200 for 2026/27 and rising with RPI) plus the eVED component at 3p per mile for full battery electric vehicles (BEVs) or 1.5p per mile for plug-in hybrids (PHEVs). At the end of the year—typically checked via your odometer reading during MOT or at renewal—there’s a reconciliation. Under-mileage? You get a credit carried forward or refund. Over-mileage? You pay the difference.

This self-reporting mirrors how many people already estimate mileage for car insurance, so it’s not entirely alien. But be careful here, because I’ve seen clients trip up when estimates drift too far from reality—overestimating to be “safe” means tying up cash unnecessarily, while underestimating can lead to a surprise bill plus potential late-payment interest.

Real-World Impact on Different Commuter Types

Let’s break this down by lifestyle, because the “average” 8,000-mile driver the Treasury often quotes doesn’t reflect most people’s reality.

Picture this: You’re an office worker in Leeds with a 12-mile each-way commute, working hybrid three days a week. That’s roughly 7,200 miles a year. At 3p per mile from 2028, your eVED adds about £216 annually—on top of whatever standard VED you’re paying (likely £200+ by then). But compare that to staying petrol: current fuel duty alone (around 53p/litre, assuming 40–50 mpg) equates to roughly 10–13p per mile in duty. You’re still ahead, potentially by £500–700 a year when you factor in cheaper home charging.

Now flip it. Take Rachel, a self-employed district nurse in rural Wales covering 18,000 miles annually visiting patients. Her eVED bill jumps to £540 (plus standard VED). If she’d stayed diesel, fuel duty might have cost her £1,000–1,200. Still a net saving, but the gap narrows dramatically—and if electricity prices spike or she can’t charge at home, the maths tilts.

For high-mileage reps or van drivers (even if light commercials are currently exempt), the shift could feel punitive unless offset by other EV advantages like lower maintenance and no London ULEZ charges (still in place in 2026).

Checklist: Preparing Your Mileage Records Now (2026 Action Plan)

None of us loves extra admin, but solid records now will save headaches later. Here’s a practical checklist I’ve given to dozens of clients:

• Photograph your odometer monthly (date-stamped) and store digitally.
• Split mileage: business vs private (crucial for self-employed or company-car users).
• Track charging costs separately—home vs public—to build a true running-cost picture.
• Note any major changes: new job, relocation, retirement—re-run estimates yearly.
• Keep old MOT certificates—they’re official mileage proof.
• If leasing or salary-sacrificing an EV, ask the provider how they’ll handle eVED estimates.

Start this habit in 2026; by 2028 it’ll be second nature.

Business Owners and Fleets: Turning a Challenge into an Opportunity

For limited company directors or fleet managers, eVED opens interesting planning angles. The mileage charge will almost certainly qualify as a fully deductible business expense (like current VED or fuel), reducing corporation tax and potentially Class 1A NICs on company cars.

One client—a small logistics firm in the Midlands—ran 12 vans. We modelled switching half to EVs pre-2028: upfront capital allowances (still 100% first-year until at least 2027) plus deductible eVED later meant net savings despite the new charge. They also negotiated with lessors to bundle estimated eVED into lease payments, smoothing cashflow.

Self-employed? Use simplified mileage allowances (45p per mile first 10,000 business miles, 25p after) as a proxy for actual costs—including future eVED. But if you claim actual running costs instead, log everything meticulously; HMRC loves challenging vague “vehicle expenses” claims.

Rare but Painful Pitfalls I’ve Seen with Clients

Be wary of these less-common traps:

• Multiple vehicles in household: One spouse’s EV and another’s petrol—eVED only hits the EV, but overall family motoring costs rise unevenly. Plan which vehicle does high-mileage runs.
• PHEVs vs full EVs: At 1.5p/mile, PHEVs look attractive for medium-mileage drivers who can’t charge daily—but real-world electric-only percentage matters hugely.
• Northern Ireland/Scotland/Wales nuances: VED is UK-wide, but MOT processes vary slightly (DVSA in GB, DVA in NI). Cross-border commuters need to confirm reconciliation points.
• Exemptions unlikely: Motability, historic vehicles, disabled-adapted—no carve-outs signalled yet for eVED.

Advanced Scenario: The High-Income EV User with Salary Sacrifice

Say you’re a higher-rate taxpayer salary-sacrificing a company EV. Benefit-in-kind (BIK) rates remain low (2% in 2025/26, rising gradually), but eVED adds a personal cost. One London client earning £80k+ saved £4,000+ annually via sacrifice—but post-2028 eVED at his 14,000 miles added £420. Still worthwhile, but we adjusted his package: employer covered part of eVED via grossed-up allowance.

Looking Ahead: What Could Change Before 2028?

The ongoing consultation (open until March 2026) could tweak rates, introduce opt-in smarter options, or refine PHEV bands. Fuel duty creep-back (frozen to September 2026, then RPI rises) keeps petrol/diesel costs climbing too—so relative EV advantage persists for most.

In my experience, the clients who win are those who model early, track diligently, and stay flexible. The “revolution” is more evolution: fairer contribution, but still favouring efficient, lower-mileage electric motoring.

The Final Picture: 2028 and Beyond – Realistic Gains, Losses and Smart Strategies

With the consultation still open until 18 March 2026, the core framework is now locked in: from April 2028, Electric Vehicle Excise Duty (eVED) kicks in at 3p per mile for full battery electric vehicles (BEVs) and 1.5p per mile for plug-in hybrids (PHEVs). This sits on top of the standard VED rate (likely £200+ by then, uprated annually with RPI), paid upfront based on your estimated annual mileage when renewing via DVLA. Reconciliation happens at MOT time or renewal using odometer readings—no trackers, no location-based pricing, privacy preserved.

The government stresses this is roughly half the fuel duty equivalent paid by petrol and diesel drivers today, aiming for revenue neutrality rather than punishment. Yet for many, the shift still feels like the end of an incentive era.

Employee Commuters: The Hybrid Reality Check

If you’re PAYE and drive a company car or your own vehicle for work, the maths often still favours going electric—especially if you charge at home overnight on a cheap tariff.

Take Emily, a marketing manager from Bristol I advised last year. She does 9,500 miles annually, mostly commuting plus occasional client visits. Pre-2028, her EV saved her around £800 yearly versus a similar petrol model (no fuel duty, lower maintenance). Post-2028 eVED adds £285 at 3p/mile. Net saving drops to roughly £500–550—still worthwhile, but tighter. We recalculated her package: she negotiated a small mileage allowance top-up from her employer to cover the new charge, keeping her take-home intact.

If you’re reimbursed at HMRC’s advisory rates (currently 45p/mile for the first 10,000 business miles), that remains unchanged—eVED doesn’t directly affect it. But if your employer switches to actual-cost reimbursement post-2028, expect more scrutiny on logs.

Self-Employed and Gig Economy: Where Losses Can Bite Hard

This is where the pain points emerge most sharply.

Consider Jamal, a courier in Greater Manchester running 28,000 miles a year through a mix of apps and private contracts. Switching to EV in 2025 saved him massively on fuel and ULEZ. But at 3p/mile, eVED adds £840 annually from 2028—plus standard VED. His real-world equivalent fuel duty (if petrol) might have been £1,400–1,600, so still a saving, but the margin shrinks dramatically if public charging costs rise or home charging isn’t viable.

I’ve seen this pattern repeatedly: high-mileage self-employed often regret early EV adoption without forward-modelling. The fix? Use the simplified mileage allowance religiously (45p first 10k business miles, 25p thereafter)—it already builds in running costs and won’t be reduced just because eVED arrives. If claiming actual expenses instead, include eVED as a deductible vehicle cost on your Self Assessment. Keep ironclad records: odometer photos, app trip logs, receipts for charging.

Checklist: Immediate Steps for High-Mileage Users in 2026

• Calculate your 2025/26 actual mileage now—use last year’s MOT certificate as baseline.
• Project 2028 exposure: multiply expected miles by 0.03 (BEV) or 0.015 (PHEV), add projected standard VED (~£205–£215).
• Compare to current petrol/diesel duty portion: roughly 10–14p/mile depending on efficiency.
• If loss-making, delay full-EV switch; consider PHEV for transitional years.
• Review business structure—limited company? eVED deductible against corporation tax; sole trader? offsets income tax & Class 4 NICs.
• Join the consultation feedback loop via GOV.UK before March 2026—your real-world data could influence final tweaks.

Rare Scenarios That Trip People Up

A few edge cases I've encountered:

• Motability scheme users: No exemption signalled for eVED—disabled drivers on higher-rate mobility component will pay the mileage charge despite VED exemption. Budget impact potentially £200–£600 yearly depending on miles.
• Ex-pat or second-home owners: UK-registered EVs driven abroad still attract eVED if mileage accrues on UK roads; foreign-registered vehicles in UK over six months must register and pay.
• Salary sacrifice schemes: BIK stays low (3% in 2025/26, rising slowly), but eVED becomes a personal outlay. Some employers are already exploring grossed-up allowances to neutralise it.
• PHEV real-world usage: If you rarely plug in, the 1.5p rate looks attractive—but if electric-only percentage is low, total costs creep closer to petrol equivalents.

One Last Client Story – The Long View

I had a retired client in Devon, Margaret, who downsized mileage post-2025 to about 4,200 miles annually. She bought a modest EV thinking "future-proof". The eVED adds just £126 yearly from 2028—negligible compared to petrol savings and free home charging on solar. She calls it her best financial decision in years. Contrast that with a rural vet doing 32,000 miles: potential £960 hit. The divide is clear—low to moderate mileage wins big; ultra-high mileage sees the smallest relative benefit.

Summary of Key Points

1. eVED launches April 2028 at 3p/mile for BEVs and 1.5p/mile for PHEVs, added to standard VED and self-reported via DVLA with odometer reconciliation.
2. Most drivers (especially <10,000 miles/year) remain better off than petrol/diesel equivalents, as the rate is roughly half fuel duty per mile.
3. High-mileage users (15,000+ miles) face the narrowest savings or potential net increases once electricity/public charging costs are factored in.
4. Businesses and self-employed can deduct eVED as a running cost—claim via mileage allowances or actual expenses with meticulous records.
5. The Expensive Car Supplement threshold rose to £50,000 for EVs from April 2026, saving many buyers £440+ annually.
6. No GPS tracking or time/location pricing—privacy protected, but accurate mileage estimates and logs are essential to avoid surprises.
7. Consultation closes 18 March 2026—participate if your usage pattern is unusual (e.g., very high or very low mileage).
8. PHEVs get a halved rate but require genuine plugging-in to maximise benefits; otherwise, costs approach conventional vehicles.
9. Fuel duty freeze ends September 2026 with gradual RPI rises—keeping petrol/diesel costs climbing and preserving relative EV advantage for most.
10. Plan now: track mileage monthly, model 2028 scenarios, review vehicle choice/timing, and speak to an accountant if business-related—the difference between gain and loss often comes down to preparation.

FAQs

Q1: Will disabled drivers on Motability or higher-rate PIP/DLA still pay the new pay-per-mile charge?

A1: Yes, unfortunately they will. While standard VED remains exempt for those on qualifying disability benefits, the new eVED mileage charge isn't covered by that exemption because it's designed to mirror fuel duty, which disabled drivers already pay indirectly through petrol or diesel. In my experience, many clients on Motability were caught off guard by this – one carer in the North East told me it added about £180 a year to her budget for her typical 6,000 miles. Check your renewal notice carefully from 2028 and budget accordingly; no automatic relief is signalled yet.

Q2: If I lease an electric car, who actually pays the eVED – me or the leasing company?

A2: Typically the leasing company pays it upfront as the registered keeper, but they'll almost certainly pass the cost on to you through higher monthly payments or a separate mileage reconciliation bill. I've seen a few forward-thinking lessors already building provisional eVED estimates into quotes. Always ask for a breakdown in writing before signing – some are offering to cap your exposure or bundle it, but it's not standard yet.

Q3: Does the pay-per-mile charge apply if I drive my UK-registered EV abroad on holiday or for work?

A3: Yes, it does – the charge is based on total miles on the odometer, regardless of where they're driven. One client who does occasional European trips for his engineering consultancy was surprised to learn his 2,000-mile French holiday would add roughly £60 to his bill. It's not location-based, so no deductions for foreign roads, but keep records of overseas trips in case future consultations introduce adjustments.

Q4: What happens if I underestimate my mileage when paying upfront and end up owing a lot at reconciliation?

A4: You'll pay the difference plus possible late-payment interest, but no penalties if it's an honest estimate. The system allows credits for under-mileage to roll forward, which helps. A tip from years of advising: overestimate slightly if you're a variable-mileage self-employed person – one plumber client I know deliberately added 10% buffer and ended up with a nice credit the following year.

Q5: Can businesses claim eVED as a deductible expense if the vehicle is used for work?

A5: Absolutely – for limited companies it's a straightforward deductible running cost against corporation tax, and for sole traders it reduces taxable profits (and Class 4 NICs). The key is separating business from private miles accurately. I've had clients use apps to log trips automatically; it makes HMRC enquiries far less painful.

Q6: If I switch from petrol to an EV mid-year in 2028, how is the pay-per-mile charge calculated?

A6: You'll pay the standard VED rate pro-rated, plus eVED only on the electric miles driven after the switch (verified by odometer at renewal/MOT). It's not retrospective. One client who changed in late 2028 saved around £120 by timing it right – plan your switch near renewal dates if possible.

Q7: Are plug-in hybrids really better off with the lower 1.5p rate, or is it a false economy?

A7: It depends on how often you actually plug in. If your real-world electric-only percentage is low (say under 50%), the savings evaporate quickly because you're still paying the charge without maximising fuel-duty avoidance. I've seen company-car drivers in cities benefit hugely, but rural users with rare charging access often end up worse off than expected.

Q8: What if my odometer is faulty or gets replaced – how does that affect eVED?

A8: DVLA will use the mileage recorded on your MOT history and any supporting evidence (like service invoices). Get a written note from the garage if replacement happens, and photograph the old and new readings. One client had a gearbox issue requiring an odometer swap and it was sorted smoothly with proper documentation – don't rely on verbal assurances.

Q9: Does eVED affect company car benefit-in-kind tax for salary sacrifice schemes?

A9: No direct impact – BIK remains based on list price and emissions (still very low for EVs at 2-3%). But the extra personal mileage charge comes out of your pocket unless your employer agrees to cover or gross it up. Some firms are already negotiating this in packages; push for it if you're in a strong position.

Q10: If I own multiple EVs in the household, can we allocate mileage to minimise the charge?

A10: No – each vehicle is taxed separately on its own odometer. But you can strategically assign higher-mileage runs to the lower-charging PHEV or keep one as a low-mile second car. A couple I advised did exactly that: the husband took the PHEV for work trips, saving about £220 annually.

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About the Author:

Adil Akhtar, ACMA, CGMA, serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than three years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants, combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.

Email: adilacma@icloud.com

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