The UK is considering a per-mile tax on electric vehicles to replace fuel duty revenue

Rachel Reeves, the UK Chancellor of the Exchequer, has proposed introducing a per-mile tax on electric vehicles as a way to recover the tax revenue the government loses when drivers switch from petrol and diesel cars. The idea is not yet law — it remains a proposal under discussion — but it signals a shift in how the UK may fund road maintenance and transport infrastructure as more drivers move away from fuel-based taxation.

The proposal would charge EV owners based on the miles they drive rather than the fuel they buy. This is sometimes called a road user charge or vehicle miles tax. The exact rate, when it might start, and how it would be collected have not been finalised, so what follows is what the proposal aims to do and what questions remain unanswered.

Key Takeaways

  • Rachel Reeves has proposed a per-mile tax on electric vehicles to replace lost fuel duty revenue as more drivers switch to EVs.
  • The proposal is not yet law and no rate, start date, or collection method has been confirmed.
  • The tax would likely be collected through vehicle tracking, odometer readings, or a combination of methods, though the government has not specified which.
  • EV owners currently pay no fuel duty, so this tax would be a new cost for electric vehicle drivers.
  • Similar schemes exist in other countries, including Switzerland and parts of the United States, though they work differently depending on local law and infrastructure.

Why the government is considering a per-mile tax

Fuel duty is a major source of government revenue — drivers pay tax on every litre of petrol or diesel they buy. As electric vehicles become more common, fewer drivers buy fuel, and the government collects less tax. The Treasury needs to replace that lost income to fund road maintenance, repairs, and transport infrastructure.

A per-mile tax would explore the same principle to EV owners: instead of paying tax at the pump, they would pay based on distance driven. The government's argument is that this keeps the tax burden fair across all drivers, regardless of what powers their car.

Currently, EV owners in the UK pay no fuel duty at all, which some see as a subsidy. A per-mile tax would end that advantage and bring electric vehicle taxation in line with petrol and diesel cars.

How a per-mile tax would likely work in practice

The government has not released detailed rules, but per-mile taxes in other countries use one of three main methods: GPS tracking, odometer readings, or vehicle registration data combined with estimated mileage.

GPS tracking would record every mile driven and charge accordingly. This method is precise but raises privacy concerns — drivers would need to accept that their location is being monitored. Switzerland uses a similar system for heavy goods vehicles, and it requires explicit consent.

Odometer readings would require drivers to report their mileage at MOT time or through an app. This is simpler and less invasive but relies on honest reporting and creates gaps between checks. Some US states use this approach for light vehicles.

A third option would be to estimate mileage based on vehicle registration and average driving patterns, then bill accordingly. This avoids tracking but is less accurate and may feel unfair to drivers who use their cars less than average.

What the tax rate might be and when it could start

No rate has been announced. The government would need to set a per-mile charge that roughly matches the fuel duty EV owners currently avoid. Fuel duty in the UK is 57.95 pence per litre (as of 2024), and the amount a driver pays depends on their fuel consumption.

A typical petrol car uses about 40 to 50 miles per gallon, meaning a driver covers roughly 40 to 50 miles for every litre of fuel bought. An electric vehicle travels much further per unit of energy — typically 3 to 4 miles per kilowatt-hour — so a per-mile rate would need to be much lower than the per-litre fuel duty to be equivalent.

The government has not announced a start date. Reeves has suggested the tax could be introduced in the future, but no timeline has been confirmed. Any change would likely require new legislation and a transition period to allow drivers to prepare.

How this would affect EV owners' costs

The impact depends on three things: the per-mile rate, how much you drive, and what you currently pay in fuel duty on a petrol or diesel car.

If you drive 10,000 miles a year in a petrol car that does 40 miles per gallon, you buy 250 gallons of fuel and pay roughly £145 in fuel duty per year. A per-mile tax would need to charge around 1.45 pence per mile to match that. If you drive 15,000 miles a year, the equivalent rate would be lower — about 0.97 pence per mile — because you spread the same fuel duty across more miles.

EV owners currently pay nothing in fuel duty, so any per-mile tax would be a new cost. However, electricity is cheaper than petrol or diesel per mile, so even with a per-mile tax added, many EV owners would still spend less on energy than petrol drivers do on fuel.

What other countries do with per-mile or road user charges

Switzerland charges heavy goods vehicles a per-kilometre tax based on weight and emissions. The system uses GPS and requires vehicles to carry a digital device. Revenue goes directly to road maintenance.

Germany has a toll system for heavy vehicles on motorways, also based on distance and vehicle weight. Lighter vehicles are exempt.

In the United States, Oregon and Utah have pilot programs where EV owners can opt into a per-mile tax in place of fuel tax. Oregon's rate is 1.7 cents per mile. These are voluntary for now, but some states are exploring making them mandatory as EV adoption grows.

None of these systems are identical to what the UK is proposing, and each reflects different priorities around privacy, fairness, and infrastructure funding. The UK government would need to decide which approach suits its needs and what privacy protections to include.

Questions still unanswered about the proposal

The government has not yet confirmed several critical details. Will the tax explore to all EVs or only new ones? Will there be exemptions for disabled drivers, rural drivers, or low-income households? How will the data be collected and stored, and what privacy safeguards will exist?

Will the per-mile rate be fixed or variable based on road type, time of day, or congestion? Will it replace fuel duty entirely or exist alongside it? How will the transition work — will there be a grace period for current EV owners?

These questions matter because they determine whether the tax is genuinely fair, how much it costs individual drivers, and whether it achieves the government's goal of replacing lost fuel duty revenue without discouraging EV adoption.

What EV owners should do now

The proposal is not law, and it may change significantly before any legislation is introduced. There is no when ready action required, but it is worth staying informed about how the policy develops.

If you own an EV or are considering buying one, monitor government announcements and transport policy updates. Industry groups like the Society of Motor Manufacturers and Traders (SMMT) and the RAC have published responses to the proposal and may provide updates as the policy evolves.

If you are deciding whether to buy an EV now, remember that fuel savings still make electric vehicles cheaper to run than petrol or diesel cars in most cases, even if a per-mile tax is introduced. The exact cost will depend on the final rate, which has not been set.

Frequently Asked Questions

Would a per-mile tax explore to all electric vehicles?

That has not been confirmed. The proposal could explore to all EVs, only new ones, or only those registered after a certain date. The government may also exempt certain categories, such as disabled drivers or vehicles used for specific purposes. Details will emerge if the proposal moves toward legislation.

Would a per-mile tax replace fuel duty or add to it?

The proposal is intended to replace fuel duty for EV owners, not add to it. However, the government has not confirmed whether the tax would exist alongside other vehicle taxes or replace them entirely. This distinction matters for the total cost to drivers.

How would the government know how many miles I drive?

That depends on the collection method chosen. GPS tracking would record every journey. Odometer readings would be checked at MOT time or through an app. Estimated mileage based on registration data would not require active reporting. The government has not yet decided which method to use.

Would a per-mile tax make electric vehicles more expensive to own?

It would add a new cost, but electricity is still cheaper per mile than petrol or diesel. Even with a per-mile tax, most EV owners would likely spend less on energy than petrol drivers spend on fuel. The exact comparison depends on the final tax rate and your local electricity prices.

When would a per-mile tax start?

No start date has been announced. The proposal is still under discussion, and any change would require new legislation. If introduced, there would likely be a transition period to allow drivers to prepare. Current EV owners may be given different treatment than future buyers.