New Road Pricing Scheme Aims to Address £40 Billion Fuel Duty Shortfall

In a significant move for UK motorists, the Chancellor has used the recent Budget to confirm that electric vehicles will be subject to a mileage-based taxation system starting April 2028. The announcement has drawn criticism from industry leaders who describe the new scheme as "confusing" for consumers.

The New Tax Structure

Under the confirmed road pricing plans:

• Electric vehicles will pay 3p per mile driven

• Plug-in hybrid vehicles (PHEVs) will pay 1.5p per mile

• Both rates will increase annually in line with Consumer Price Index inflation

• EV owners will continue paying the standard £195 annual VED introduced in April 2025

Addressing the Tax Revenue Gap

The Treasury initiative aims to recover an estimated £1.9 billion by 2030, addressing the growing concern over lost fuel duty revenue as Britain transitions toward zero-emission vehicles. The move comes after years of parliamentary discussion about how to fill the £40 billion shortfall created by declining motoring tax revenues.

Industry Reaction and Consumer Impact

The motoring industry has expressed concerns about the potential impact on electric vehicle adoption. Many experts worry that additional per-mile charges could discourage drivers from making the switch to cleaner vehicles, particularly those who cover higher annual mileage.

The confirmation follows initial reports that emerged after the Chancellor's November Commons speech, with the automotive sector bracing for the new system's effect on EV sales and owner costs.

Looking Ahead

As the 2028 implementation date approaches, both industry stakeholders and electric vehicle owners will be closely monitoring how the new pay-per-mile system integrates with existing motoring costs and affects the total cost of electric vehicle ownership.