Drivers of electric vehicles could soon face a new road tax, as reports suggest the government is exploring a pay-per-mile charge for EVs from 2028.
With pressure on the Chancellor to find extra revenue, ministers are said to be considering a 3p per mile levy for electric cars and a slightly lower rate for hybrids.
The aim is to replace lost fuel duty income as more drivers make the switch to electric.
It follows April’s change that brought EVs into line with other vehicles for Vehicle Excise Duty (VED), ending one of the major cost advantages that fleet operators have enjoyed since the early days of electric adoption.
Why Is A New EV Tax Being Discussed?
Fuel duty currently raises around £25 billion a year, but with growing numbers of electric vehicles on the road, the Treasury is seeing a growing shortfall.
A government spokesperson said that fuel duty “covers petrol and diesel, but there’s no equivalent for electric vehicles,”, with the idea being to “create a fairer system for all drivers.”
The challenge is how to do that without slowing the transition to zero-emission transport. Fleets have invested heavily in electrification, and many still face higher upfront costs when purchasing EVs, even if the running costs are lower.
The Society of Motor Manufacturers and Traders (SMMT) has described the proposed measure as ‘the wrong one at the wrong time.’ While others have warned that any sudden new tax could discourage uptake of EVs among fleets and businesses as one of the key benefits of EV ownership from a business and financial point of view would be removed.
The industry argument is that EV adoption remains fragile, with charging infrastructure, range concerns and residual values already posing challenges. Adding another cost at this stage could unsettle that progress.
What Would A New EV Tax Mean For Fleets?
For fleets, this could have a direct impact on total cost of ownership calculations.
Lower fuel costs have long been one of the biggest reasons to transition to electric, so a pay-per-mile charge could alter the maths, particularly for high-mileage operations.
There are also questions around how such a tax would be implemented…
Would it rely on odometer readings, self-reporting, or connected-vehicle data through telematics?
For fleet managers, any new requirement could add to the administrative load unless it’s carefully planned and integrated with existing systems.
Whatever happens in the Budget, it’s clear that the landscape for fleet taxation is evolving and the focus will increasingly be on how vehicles are used, not just what fuels them.
Having clear oversight of vehicle usage, efficiency and driver behaviour will become even more important for keeping costs under control and ensuring compliance.
At Driving Monitor, our Telematics Monitor and Risk Monitor tools give fleet managers real-time insight into vehicle performance, mileage, and driver safety, helping them stay informed and prepared for whatever comes next.
The reality is that as tax systems change and costs rise, the fleets that understand their data best will always be the ones ahead of the curve.
