A New Chapter for EVs – With 3p per mile tax introduced.
What the 2025 Autumn Budget Really Means for Drivers & Fleets
The 2025 Autumn Budget marks a turning point for electric vehicles in the UK. From 2028, EVs will begin contributing to road tax through a new pay-per-mile system. At the same time, the government has increased EV tax thresholds, extended grants, and committed further funding to charging infrastructure.
The Headlines
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From April 2028:
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Battery-electric cars: 3p per mile
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Plug-in hybrids: 1.5p per mile
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Typical driver (8,000–8,500 miles/year):
Around £240–£260 per year -
Still cheaper than petrol or diesel fuel duty
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“Luxury Car” EV tax threshold rises from £40k → £50k (from April 2026)
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Electric Car Grant extended to 2029–30 with £1.3bn extra funding
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Leasing remains one of the safest, most predictable ways to run EVs
What’s Changing: Pay-Per-Mile Road Tax Explained
From April 2028, electric and plug-in hybrid cars will pay road tax based on how much they’re driven.
| Vehicle type | Rate |
|---|---|
| Battery-electric (BEV) | 3p per mile |
| Plug-in hybrid (PHEV) | 1.5p per mile |
This sits on top of existing Vehicle Excise Duty (VED), which EVs now pay like other cars.
What does that mean in real terms?
| Miles per year | BEV (3p) | PHEV (1.5p) |
|---|---|---|
| 5,000 | £150 | £75 |
| 8,000 | £240 | £120 |
| 11,000 | £330 | £165 |
| 15,000 | £450 | £225 |
| 20,000 | £600 | £300 |
For context:
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Petrol fuel duty averages 6–7p per mile
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Even with pay-per-mile, EVs remain significantly cheaper to run
Electric vans, trucks and motorcycles will initially be exempt.
Suggested Ways The Mileage Could Be Collected?
The government consultation suggests:
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Drivers estimate annual mileage when renewing VED
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Pay upfront or monthly by Direct Debit
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Mileage is checked annually via:
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MOT records, or
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Annual mileage checks for newer vehicles
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Any difference is reconciled at year-end
This system avoids live tracking and protects driver privacy.
Why Is This Happening?
Simple answer: fuel duty is disappearing as EV adoption grows.
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Fuel duty raised £24.6bn in 2024
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EVs currently contribute almost nothing to road taxation
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Pay-per-mile shifts tax from fuel → road usage
Even then, the Office for Budget Responsibility estimates the new tax only replaces around 25% of lost fuel duty by 2050.
This isn’t an EV crackdown — it’s a long-term tax rebalancing.
The “Luxury / Expensive Car Supplement” Change (Good News)
Previously, cars over £40,000 paid the Expensive Car Supplement (ECS).
What’s changed?
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From April 2026, EV ECS threshold rises to £50,000
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Many mid- and upper-spec EVs now avoid the surcharge
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This keeps EVs competitive against petrol and diesel equivalents
👉 A big win for company cars, leasing customers and premium EV buyers.
The Electric Car Grant Is Staying
The government has:
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Added £1.3 billion in funding
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Extended the Electric Car Grant to 2029–30
Eligible vehicles can still receive up to £3,750 off list price.
The new Nissan LEAF has already been confirmed as eligible, with more models expected.
This directly offsets rising ownership costs.
What About Plug-In Hybrids?
PHEVs are more complicated.
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They pay 1.5p per mile on all driving
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They still pay fuel duty when using petrol or diesel
In practice:
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A petrol PHEV could cost ~8.5p per mile
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That can be more expensive than petrol-only cars
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This may accelerate the shift away from PHEVs toward full EVs
PHEVs remain useful, but their “bridging technology” role is becoming less attractive.
Will This Slow EV Adoption?
Possibly — but not dramatically.
The OBR estimates:
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~440,000 fewer EV sales over the forecast period
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Partially offset by grants, ECS changes and infrastructure funding
Manufacturers may respond by:
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Lowering prices
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Improving lease deals
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Accelerating affordable EV launches
Our View: EVs Aren’t Slowing — They’re Maturing
This Budget doesn’t end the EV journey. It normalises it.
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EVs now contribute fairly to road use
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Running costs rise modestly — but remain lower than ICE
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Grants, tax thresholds and infrastructure funding remain strong
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Policy risk is real — which is exactly why leasing makes sense
Why leasing still wins:
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Predictable monthly costs
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No long-term exposure to tax changes
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Easy upgrades as technology and policy evolve
Bottom Line
EVs are no longer the “tax-free exception” — and that’s a sign of success, not failure.
For drivers, fleets and businesses:
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The economics still stack up
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The future is still electric
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Flexibility is now more important than ever
The EV revolution hasn’t stalled.
It’s simply entered its next phase.
