Budget 2025’s EV Pay-Per-Mile Tax: A Policy That Undermines the Very Transition It Claims to Support

  • Technical review: Thomas Jevons (Head of Training, 20+ years)
  • Employability review: Joshua Jarvis (Placement Manager)
  • Editorial review: Jessica Gilbert (Marketing Editorial Team)
Infographic on the UK’s EV pay-per-mile tax, showing 3p rate, petrol comparison, fewer EV sales, fraud risk, and higher rural costs.
UK EV pay-per-mile tax could slow adoption and raise costs

Introduction

I’m going to be honest: Budget 2025’s introduction of a 3p-per-mile tax on electric vehicles has left me deeply disappointed. Not because I don’t understand the Treasury’s revenue problem. Fuel duty brings in £25 billion annually and that’s evaporating as EVs replace petrol cars. I get it. But introducing a tax structure that the government’s own forecaster (the OBR) says will deter 440,000 EV sales by 2031 directly contradicts everything we’ve been told about reaching net zero by 2050.

Here’s what frustrates me most: just last year, the government updated the EAS 2024 requirements to mandate that all registered electricians demonstrate competence in EV charging, solar PV, and battery storage by October 2026. The entire regulatory framework assumes mass EV adoption is coming. We’re training electricians in these skills because policy says that’s where the work will be. Now the Treasury introduces a tax that deliberately slows the transition.

The new Electric Vehicle Excise Duty (eVED) charges battery electric vehicle drivers 3p per mile and plug-in hybrid drivers 1.5p per mile from April 2028. For the average UK driver covering 8,500 miles annually, that’s £255 extra per year on top of the standard £195 Vehicle Excise Duty that EVs already pay from 2025. Revenue projections suggest it’ll raise £1.1 billion in 2028-29, rising to £1.9 billion by 2030-31.

But here’s the problem: that £1.9 billion represents less than 15% of the projected £13 billion annual shortfall in motoring taxation by 2035. It’s a marginal revenue gain at the cost of undermining climate commitments. The Energy Systems Catapult modelling suggests the tax could result in an additional 4 million tonnes of CO2 emissions between now and 2035 because people will delay switching from petrol cars or hold onto their ICE vehicles longer.

And then there’s the enforcement question that frankly exposes how poorly thought-through this policy is: the government acknowledges that odometer fraud (clocking back mileage) is already a problem affecting hundreds of thousands of vehicles. Now they’re introducing a financial incentive to commit that fraud while relying on the same MOT odometer checks to verify mileage for taxation. It doesn’t add up.

This article breaks down what the tax actually means, why it contradicts net zero targets, and why the enforcement mechanism is fundamentally flawed.

Split comparison of EV charging point and petrol pump showing new pay-per-mile tax rates versus existing fuel duty
"Budget 2025 introduces 3p/mile tax on EVs while extending fuel duty freeze for petrol cars until September 2026

What the Tax Actually Is and When It Starts

The Electric Vehicle Excise Duty comes into effect from April 2028 and charges based on self-declared annual mileage. Battery electric vehicles pay 3 pence per mile, plug-in hybrids pay 1.5 pence per mile, and both rates will increase annually in line with inflation from 2029 onwards.

The system integrates with the existing Vehicle Excise Duty renewal process. Drivers estimate their annual mileage when they renew VED and pay upfront for the year. At the end of the period, they submit actual mileage (verified via MOT odometer readings or first registration for new vehicles), and any difference results in a top-up payment or refund.

For context, the Treasury calculated the 3p per mile rate as roughly half the per-mile fuel duty paid by average petrol or diesel car drivers, which sits around 6-7p per mile. The argument is that even with the new tax, EV drivers will still pay less than ICE vehicle owners. But that misses the point entirely.

How Much It Costs in Practice. The OBR projects that the average EV driver covering 8,500 miles annually will pay around £255 per year. But that’s an average. Rural drivers covering 10,000-15,000 miles annually face £300-£450 in additional costs. Urban drivers with low mileage (3,000-4,000 miles) pay £90-£120.

On top of this, EVs are already subject to standard VED from April 2025 (£195 per year), and the Expensive Car Supplement for vehicles over £50,000 rises to £440 annually from 2026. Stack it all up and a rural EV driver with a car valued over £50,000 is looking at £195 base VED + £440 ECS + £450 mileage tax = £1,085 annually, compared to zero VED just two years earlier.

Revenue from the tax is projected to rise from £1.1 billion in 2028-29 to £1.9 billion by 2030-31, based on an estimated 6 million EVs on UK roads by 2028. But those projections are net of the reduction in EV sales caused by the tax itself. The OBR’s modelling already factors in that fewer people will buy EVs because of higher total cost of ownership.

Timeline showing progressive introduction of EV taxation from 2025 to 2028 with cumulative cost examples
EV taxation compounds over three years: standard VED (2025), increased Expensive Car Supplement (2026), and pay-per-mile tax (2028)

The Contradiction: ZEV Mandate vs Tax Deterrent

Here’s where the policy becomes incoherent. The government’s Zero Emission Vehicle (ZEV) Mandate requires manufacturers to ensure that 22% of new car sales in 2025 are zero-emission, rising to 28% in 2026, 33% in 2027, 38% in 2028, 52% in 2029, and 80% by 2030. These aren’t targets. They’re legally binding quotas with financial penalties for non-compliance.

Manufacturers that miss their quotas face fines of £15,000 per non-compliant vehicle. For context, if a manufacturer sells 100,000 cars in a year and the mandate requires 28% to be zero-emission but they only achieve 20%, they’re 8,000 vehicles short. That’s a £120 million fine. To avoid this, manufacturers either need to dramatically cut EV prices to stimulate demand, cross-subsidise EV sales through higher ICE vehicle prices, or pay the fine and pass the cost to consumers across the entire range.

Now introduce a tax that increases the total cost of EV ownership by £250-£450 annually. The OBR’s own modelling says this will deter 310,000-440,000 EV sales across the 2026-2031 forecast period compared to a scenario without the tax. That reduction in demand makes it harder for manufacturers to meet ZEV Mandate quotas. They’re being simultaneously told to sell more EVs while the Treasury makes EVs less attractive to buyers.

The Society of Motor Manufacturers and Traders (SMMT) described it as “entirely the wrong measure at the wrong time,” warning it would “deter consumers and further undermine industry’s ability to meet ZEV mandate targets.” Ford UK called it a “confusing message” to consumers who are already hesitant about switching to electric.

The Treasury’s Response. The government’s answer to this contradiction is to extend the Plug-in Car Grant by £1.3 billion to offset the negative demand impact of the tax. So they’re introducing a tax that slows EV adoption, then spending £1.3 billion in subsidies to counteract the damage caused by their own tax. That’s not coherent policy. It’s fiscal gymnastics to plug a revenue hole while pretending to maintain climate commitments.

OBR's 440,000 Fewer Sales: What It Means for Net Zero

The OBR’s estimate that the tax will deter 440,000 EV sales by 2031 is the single most damaging number in this entire policy. That figure comes from elasticity modelling that accounts for how increased total cost of ownership affects purchasing decisions. When you make EVs more expensive to run, fewer people switch from petrol cars, and those who were planning to switch delay their purchase.

The Energy Systems Catapult’s analysis goes further, estimating that the 3p per mile tax could result in 5% fewer electric cars on the road by 2030 and 8% fewer by 2035 compared to pre-tax projections. Over the period from now until 2035, that slower adoption rate translates to an additional 4 million tonnes of CO2 emissions because those petrol and diesel cars that should have been replaced remain on the road longer.

Let me put that in context. The UK’s legally binding Carbon Budget for 2033-2037 requires average annual emissions of 640 million tonnes of CO2 equivalent. An extra 4 million tonnes might sound small as a percentage, but every million tonnes matters when you’re trying to stay within carbon budgets. And critically, road transport accounts for roughly 24% of UK greenhouse gas emissions. Slowing the electrification of transport directly undermines our ability to meet those budgets.

The Climate Change Committee has been clear that achieving net zero by 2050 requires near-complete decarbonisation of road transport by 2040. The pathway they’ve outlined depends on rapid EV uptake in the 2020s and 2030s to ensure that the majority of the vehicle fleet is electric by mid-century. A tax that deliberately slows uptake in the critical 2028-2031 window pushes that timeline backwards.

Why Behavioral Effects Matter More Than the Numbers Suggest. The OBR’s 440,000 figure is based on economic elasticity, how price changes affect demand. But it doesn’t fully capture psychological effects. When people perceive that the government is “punishing” EV adoption by adding new taxes after promising lower running costs, it creates hesitancy that goes beyond pure financial calculation.

Survey data from the AA and RAC shows that nearly 50% of drivers feel the tax is “punishing people for trying to be green.” That sentiment matters. It’s not just about whether EVs remain marginally cheaper than petrol cars after the tax. It’s about whether people trust that the policy environment will remain stable long enough to justify the higher upfront cost of an EV.

Chart comparing projected EV sales with and without pay-per-mile tax showing 440,000 reduction and 4 million tonne CO2 impact
OBR projects 310,000-440,000 fewer EV sales by 2031 due to increased total cost of ownership from pay-per-mile tax

The Odometer Fraud Problem Government Admits Exists

Let’s talk about enforcement, because this is where the policy completely falls apart. The eVED relies on self-declared mileage verified through MOT odometer readings. Drivers estimate their annual mileage when they renew VED, pay upfront, then true-up at the end of the year based on actual odometer readings at MOT or first registration.

The problem? Odometer fraud (known as clocking) is already endemic in the UK used car market. Industry estimates suggest around 5% of vehicles have had their mileage wound back at some point, affecting hundreds of thousands of cars. The practice inflates resale values and hides wear and tear, but historically the financial incentive has been limited to sellers trying to get a better price when flogging a used motor.

Now the Treasury is creating a direct annual tax incentive to commit odometer fraud. Wind back 3,000 miles and you save £90 per year on a BEV. Wind back 5,000 miles and you save £150. For high-mileage drivers facing £400+ annual bills, that’s a meaningful incentive. And the enforcement mechanism is the same MOT odometer check that’s failed to prevent clocking in the past.

Government Acknowledges the Risk. Budget documents and Treasury impact assessments acknowledge that “enhanced digital audits and penalties” will be needed to prevent fraud, drawing from EU standards. A consultation has been launched to explore enforcement mechanisms. But here’s the reality: effective prevention requires either encrypted digital odometer logging (which would need to be retrofitted to millions of existing EVs) or mandatory telematics/GPS tracking devices.

Telematics would work (it’s what pay-as-you-drive insurance already uses) but it’s politically toxic because it involves real-time location tracking. The government explicitly ruled out mandatory GPS tracking to protect privacy. So they’re left with the MOT system, which checks mileage once a year and has no real-time verification. It’s trivially easy to wind an odometer back between MOT tests, drive for a year, then wind it forward again before the next test. Digital odometers are slightly harder to manipulate than mechanical ones, but tools and services exist.

The administrative cost of running a robust anti-fraud system is estimated at £100-£200 million annually at a national scale. That’s 10-20% of the projected revenue in the early years. And even with enhanced audits, you’re still playing catch-up with fraudsters who have a £90-£450 annual incentive to beat the system.

The Alternative: Telematics or Nothing. Realistically, the only way to make this enforceable is mandatory telematics with real-time mileage logging. But that requires either factory-fitted systems in all new EVs from 2028 (possible but expensive) or retrofitting millions of existing EVs (logistically nightmarish and prohibitively expensive). The third option is a flat annual EV fee like the US states use, which is regressive but at least enforceable.

What we have instead is a half-baked compromise that acknowledges the fraud risk but lacks the enforcement teeth to address it. It’s the worst of both worlds: complex enough to create administrative burden, weak enough to invite widespread non-compliance.

Diagram showing EV pay-per-mile tax enforcement mechanism and vulnerability to odometer fraud between MOT checks
Annual MOT checks provide only once-yearly verification, creating 12-month window for odometer manipulation with £90-£450 financial incentive

Why This Undermines Electrical Training and Infrastructure Investment

Thomas Jevons, our Head of Training, puts it bluntly:

"Charging infrastructure investment relies on projected EV usage. If the pay-per-mile tax reduces uptake and people drive their EVs less to avoid the charge, the business case for expanding the charging network weakens. That creates a supply-side bottleneck that makes the EV transition even harder."

He’s right. Charging network operators like InstaVolt, BP Pulse, and Shell Recharge base their investment decisions on projected utilisation rates. If the OBR is correct that 440,000 fewer EVs will be sold by 2031, that’s 440,000 fewer users of the charging network. And if existing EV drivers reduce their mileage to avoid tax (which behavioural economics suggests some will), overall charging network usage drops further.

Lower utilisation means longer payback periods on charging point installations. That makes new sites less financially attractive and could slow the rollout of infrastructure in areas that are already underserved. Particularly rural locations where the business case was marginal to begin with.

This directly affects the electrical sector. We’re currently training electricians in EV charging installation precisely because government policy and the ZEV Mandate indicated mass EV adoption was coming. The course qualifications we offer (City & Guilds 2921-34 for domestic and commercial EV charging) are based on the assumption that there will be sustained demand for installations over the next decade.

If the market slows because of taxation policy, contractors become more cautious about taking on apprentices in specialist areas like EV charging. Employers tell us they’re already concerned about reduced demand. When government policy introduces uncertainty about EV uptake rates, it affects workforce planning across the entire supply chain.

The Skills Investment Mismatch. Young people entering electrical training are being told that green energy is where the jobs will be. Solar PV, battery storage, heat pumps, and EV charging are the growth sectors. The EAS 2024 update mandated competence in these areas by October 2026 for all registered electricians. The entire regulatory and training framework assumes these technologies are scaling rapidly.

Then the Treasury introduces a tax that undermines one of the four pillars of that growth: EV charging. It’s not just about revenue. It’s about sending contradictory signals to people making long-term career and training investment decisions.

Joshua Jarvis, our Placement Manager, sees this in real-time:

"For electricians working in rural areas, EVs made sense because home charging was cheap. Now they're facing £300-£450 extra annually in mileage tax on top of already higher insurance and limited public charging options. That's a significant chunk of earnings for a tradesperson covering large service areas."

Rural electricians cover massive service areas, with 10,000 to 15,000 miles annually not unusual. An EV made economic sense because running costs were low. Now you’re adding £300-£450 per year to their overheads. For a self-employed tradesperson, that’s real money. And it comes on top of higher EV insurance premiums (which can be 10-20% higher than equivalent ICE vehicles) and the lack of public charging infrastructure in rural areas, meaning they’re more reliant on home charging.

The irony is that rural areas are precisely where EVs should make the most sense from a running-cost perspective. Low-mileage urban drivers have alternatives: public transport, cycling, walking. High-mileage rural drivers don’t. They need vehicles for work, and EVs offered a way to reduce running costs while meeting environmental goals. This tax undermines that proposition.

Electrician's van at rural location showing EV charging installation work and high-mileage service area challenges
Rural electricians covering 10,000-15,000 miles annually face £300-£450 additional tax, undermining EV economic case for essential trade users

International Comparisons: This Doesn't Work Elsewhere Either

It’s not like the UK is pioneering new policy here. Other countries have tried EV-specific taxation, and the results are instructive. Mostly as warnings rather than success stories.

Australia (Victoria). Victoria introduced a 2.5 cents per kilometre road-user charge for EVs in 2021. It was immediately controversial, challenged in court, and eventually overturned by the High Court in 2023 on constitutional grounds. The court ruled that it was inconsistent with the Commonwealth’s power over excise duties. Setting aside the legal technicalities, the policy was deeply unpopular and seen as regressive because it hit early adopters who’d invested in EVs based on lower running costs.

United States (Multiple States). Texas, Oregon, Utah, and other states have introduced flat annual EV registration fees ranging from £100-£200 (roughly $150-$300). These are administratively simple but regressive. Low-mileage drivers pay the same as high-mileage drivers. Oregon runs a voluntary Road Usage Charge pilot (OReGO) where participants pay per mile instead of fuel tax, but adoption is low and administrative costs are high (5-10% of revenue). The lesson: flat fees are easy but unfair, per-mile systems are fairer but expensive to run.

Norway. Norway is often held up as the EV success story, with over 90% of new car sales being electric. But they achieved that through massive, sustained incentives: no purchase tax, no VAT, free tolls, free parking, bus lane access. Now that the market is saturated, they’re unwinding some of those incentives (reintroducing VAT, toll charges), but critically they did so only after achieving mass adoption. The UK is trying to tax EVs before mass adoption is complete, which is backwards.

Netherlands. Proposed per-kilometre taxation (2-5 eurocents per km) has been delayed repeatedly due to privacy concerns and political backlash. The Dutch experience shows that telematics-based systems (the only way to make per-mile taxation truly enforceable) are politically difficult because they require tracking vehicle movements.

Germany. Company car benefit-in-kind (BiK) taxation heavily favours EVs, which has driven corporate fleet adoption. But fiscal incentives for private buyers remain weak, and there’s no equivalent to the UK’s ZEV Mandate forcing manufacturers to hit sales quotas. Germany’s lesson is that incentives work better than mandates or taxes in driving early adoption.

The Pattern. The international evidence shows that successful EV transitions rely on sustained incentives during the adoption phase, not early taxation. Countries that introduce EV-specific taxes too soon either face backlash and reversals (Australia), struggle with enforcement and administrative costs (US), or delay implementation due to political resistance (Netherlands). The UK is walking straight into these known pitfalls.

What Should Happen Instead

If I were advising the Treasury (and obviously I’m not, because they didn’t ask), here’s what rational EV taxation policy would look like:

Delay until 2035 at the earliest. Wait until EV adoption crosses 50% of the vehicle fleet before introducing usage-based taxation. Use the interim period to phase out purchase incentives gradually, ensuring the market transition is complete before shifting to a revenue-generation phase. The ZEV Mandate already pushes adoption through 2030. Let that work before adding tax disincentives.

Make it universal, not EV-specific. If the goal is to replace lost fuel duty, eventually all vehicles need to be part of a road-pricing system, not just EVs. Introducing it only for EVs creates a perverse incentive structure where the cleanest vehicles pay the most. A universal system could start with ICE vehicles first (who currently pay fuel duty anyway), then extend to EVs once adoption is mainstream.

Include a free mileage allowance. The Social Market Foundation modelled a revenue-neutral road-pricing system with a 2,500-5,000 mile annual free allowance to protect low-income and low-mileage drivers. This addresses regressivity while maintaining the usage-based principle. The current policy has no such protection.

Use weight as a factor, not just mileage. Heavier vehicles cause more road damage. A weight-based component (as several European systems use) would make the tax fairer and incentivise lighter, more efficient vehicles. This would also address the issue of large EVs (like electric SUVs) causing disproportionate infrastructure wear.

Fix enforcement before implementation. Either mandate telematics (accepting the privacy trade-off) or accept that odometer-based systems will be widely defrauded and plan accordingly. Don’t implement a tax structure that relies on an enforcement mechanism the government admits is vulnerable.

Pair with investment, not cuts. If you’re going to tax EV usage, ring-fence the revenue for EV infrastructure: charging networks, grid upgrades, rural coverage. That way the tax funds the thing it’s supposedly slowing down. Currently the revenue just disappears into general Treasury coffers.

The fundamental problem is that this policy prioritises short-term revenue extraction over long-term environmental goals. It’s a fiscal band-aid that undermines the very transition it’s meant to fund.

Comparison infographic showing current EV pay-per-mile policy versus recommended policy alternatives for fairer taxation
Recommended alternatives address regressivity, enforcement, and timing issues while maintaining fiscal sustainability

What This Means If You're Considering Electrical Training

For people looking at careers in electrical work, the EV taxation policy creates genuine uncertainty about the low-carbon electrical sector. That doesn’t mean the opportunity has disappeared. Demand for EV charging installations, solar PV, battery storage, and heat pumps remains strong and will continue growing. But the pace of that growth is now subject to policy risk.

The EAS 2024 requirements still mandate competence in these areas by October 2026 for all registered electricians. That regulatory framework hasn’t changed. Contractors still need electricians who can install EV chargers, design solar systems, and handle battery storage. But the market confidence that underpins long-term workforce planning has been shaken.

If you’re training now or considering electrical qualifications, the green energy skills remain valuable. The UK is legally committed to net zero by 2050, and that requires mass electrification of transport, heating, and industry. The question isn’t whether those jobs exist. It’s whether government policy will support the transition at the pace promised, or whether fiscal priorities will keep slowing it down.

The honest answer is that policy uncertainty is now a permanent feature of the low-carbon economy. Incentives get introduced, then withdrawn. Regulations get tightened, then relaxed. Taxes get imposed, then potentially reversed after backlash. For electricians investing in specialist qualifications, that means diversification matters. Don’t rely solely on one technology or sector. Build a broad skillset that covers domestic, commercial, and low-carbon work so you’re not overly exposed to any single policy shift.

Conclusion: Disappointed but Not Surprised

I’m disappointed by this policy because it’s exactly the kind of short-termist thinking that undermines long-term goals. The Treasury needs revenue. I get that. Fuel duty is disappearing as EVs replace petrol cars. I understand the problem. But introducing a tax that your own forecaster says will deter 440,000 EV sales and result in 4 million tonnes of additional CO2 emissions is the definition of counterproductive.

The £1.9 billion this raises by 2030-31 represents less than 15% of the projected £13 billion annual motoring tax shortfall. It’s a marginal revenue gain that comes at the cost of slower decarbonisation, weakened infrastructure investment, and a policy signal that tells people the government doesn’t actually believe in the transition it claims to be leading.

And the enforcement mechanism is a joke. The government admits odometer fraud is already a problem, then introduces a tax that creates a financial incentive to commit that fraud while relying on the same MOT checks that have failed to prevent clocking for decades. Without mandatory telematics (which is politically toxic), this system will be widely gamed, meaning the revenue projections are likely optimistic and the compliance burden falls disproportionately on honest drivers.

The international evidence shows this doesn’t work. Australia tried it and faced legal challenges. US states use flat fees that are regressive. Norway only taxed EVs after achieving mass adoption. The Netherlands keeps delaying because of privacy concerns. We’re walking into known pitfalls.

What frustrates me most is that rational alternatives exist. Delay until 2035, make it universal across all vehicles, include a free mileage allowance, factor in vehicle weight, fix enforcement properly, and ring-fence revenue for infrastructure investment. None of that is radical or impossible. It’s just sensible sequencing that prioritises the transition over short-term revenue.

Instead we’ve got a policy that undermines net zero goals, contradicts the ZEV Mandate we introduced just last year, relies on unenforceable self-declaration, and disproportionately hits rural and high-mileage drivers who don’t have transport alternatives.

I hope the ongoing consultation results in meaningful changes. I hope the government recognises that slowing EV adoption to protect revenue is a false economy when you’ve got legally binding carbon budgets to meet. But I’m not holding my breath.

For now, this is the policy environment we’re working in. For electricians and people considering electrical training, the advice is to build broad skillsets, stay adaptable, and accept that policy uncertainty is now permanent in the low-carbon economy. The opportunities are still there. Government just keeps making them harder to reach.

References

Note on Accuracy and Updates

Last reviewed: 03 December 2025. This page reflects analysis of Budget 2025 announcements published 26 November 2025. EV pay-per-mile taxation policy is subject to ongoing government consultation running through Q1 2026. Revenue projections and enforcement mechanisms cited reflect OBR forecasts and Treasury impact assessments published alongside Budget 2025. OBR’s 440,000 fewer EV sales estimate is derived from macroeconomic modelling with elasticity assumptions of -0.5 to -1.0 on EV demand relative to total cost of ownership increases. Energy Systems Catapult CO2 impact modelling published October 2025. Odometer fraud prevalence estimates from automotive industry sources and consumer protection bodies. This article represents editorial analysis and opinion on policy implications for UK net zero targets and the electrical training sector. Next review scheduled following government consultation outcomes and any policy amendments announced in Spring Statement 2026.

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