Chancellor Rachel Reeves plans to charge electric vehicle drivers

Chancellor Rachel Reeves is planning to charge electric vehicles (EVs) by the mile to compensate for the loss of fuel tax revenue. Following public consultation, Reeves proposed EV road charges are expected to take effect from April 2028.

By the early 2030s, it could generate 1.8 billion a year for the public purse. Reeves is likely to implement a 3p-per-mile charge for EVs on top of the existing road tax to compensate for revenue loss from fuel tax. Reeves Reeves

EV motorists would have to pay an extra $326 annually

Reeves is reportedly considering per-mile EV charges in her November 26 Budget to help plug a £20bn–£30bn budget gap. According to sources, the government’s plans would see the average EV driver paying an additional £250 ($326) per year. Currently, the average petrol or diesel car owner pays £600 ($784) in fuel duty.

Under the proposals, hybrid drivers would also be charged lower per-mile fees compared with zero-emission vehicles. Additionally, vehicles wouldn’t be tracked electronically, though the plans don’t specify whether vans and light commercial vehicles are part of the scheme. The Treasury has, however, declined to comment on any speculation before November 26.

Nonetheless, officials insist they are still eager to expand EV ownership in line with the UK’s net-zero ambitions. A government representative, when asked about the possibility of per-mile charges for drivers of EVs, remarked, “Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles. We want a fairer system for all drivers whilst backing the transition to electric vehicles.”

Last year, the Association of Fleet Professionals had cautioned that a pay-as-you-drive charge for electric cars could have unforeseen consequences. Similarly, now, Sir Mel Stride, the shadow chancellor, says it would be wrong for Reeves to target commuters and drivers simply to fix a budget gap of her own making.

So far, the government has already provided £4 billion in EV support, including grants worth up to £3,750 for each qualifying vehicle. A spokesperson added that while the tax system must fairly fund roads and public services, ministers will continue to explore additional measures to support EV drivers.

However, FleetCheck chief executive Peter Golding claimed that the new tax burdens could quickly reverse the progress made by the tax incentives. He pointed out that Budget changes to VED last year increased EV running costs by around £2,500 across five years.

Some had suggested that the government cut fuel duty

Previous governments have repeatedly held off on fuel duty increases to avoid upsetting motorists. However, the OBR calculates that by 2024, the total cost of that decision, from 2010–11 to 2025–26, had risen to around £100 billion ($130 billion).

Earlier, Paul Holland, UK and ANZ Fleet Managing Director at Corpay and its UK subsidiary, Allstar, had previously said Reeves should cut fuel duty to help spur growth.

He explained: “Fleets are on the frontline of costs. A penny in duty doesn’t just hit a business or fleet; it feeds straight through into the weekly shop, the cost of a parcel, and the price of a pint of milk. Keeping the freeze is not some political gesture; it is about stopping inflation from creeping into every corner of the economy.”

He added that the government should use the Autumn Budget to incentivise a move to cleaner fuels, such as rewarding operators who make sustainable choices and cutting duty to reflect this. 

Acting Chief Executive of Logistics UK, Kevin Green, also stated that Reeves’ proposal to add costs on the fleets would only further stymie growth and lead to higher inflation rates. The Road Haulage Association has also been calling for an emissions-linked rebate on fuel duty to promote the use of low-carbon alternatives, including hydrotreated vegetable oil, and accelerate the transition to net-zero fleets.

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