Electric vehicle excise duty (eVED)

Electric vehicle excise duty (eVED) is a proposed mileage‑based tax on zero‑emission cars (EVs) and plug‑in hybrid cars (PHEVs), planned to begin in April 2028. It is intended to address the long‑term decline in fuel duty revenue as more motorists move to electric vehicles (EVs).

Introduction to motoring taxation

Motoring taxation in the UK has two main elements: fuel duty and vehicle excise duty (VED). Fuel duty is charged per litre of fuel used. It is currently set at 52.95p per litre on unleaded petrol and diesel, with value added tax (VAT) charged on top. Because EVs do not use petrol or diesel, they do not pay fuel duty. How much a motorist pays in fuel duty depends on how far they drive and the fuel efficiency of their vehicle.

VED is an annual charge applied when a vehicle is first registered and at each renewal. Rates depend on factors like a vehicle’s year of registration, list price and carbon emissions. New cars registered from April 2017 pay a first‑year rate based on carbon dioxide emissions, ranging from £10 to £5,690 in 2026/27. From the second year, those cars pay a standard rate of £200. Cars costing over £40,000 pay an additional “expensive car supplement” of £440 for five years after the second year of registration. This threshold is £50,000 for EVs.

Fuel duty raised £24.4 billion in 2024/25 and VED raised £8.4 billion. Fuel duty revenue is decreasing as a share of gross domestic product (from 1.7% in 2010/11 to 0.8% in 2024/25) because more motorists are choosing zero‑emission vehicles and because the fuel duty rate has not been increased in line with inflation since 2011. The Office for Budget Responsibility (OBR) expects fuel duty receipts to fall to 0.1% of GDP (PDF) by 2050/51, although this figure is speculative.

Recent government action on vehicle excise duty (VED) and electric vehicles (EVs)

Successive governments have considered how to replace declining fuel duty revenue. Suggestions have included a pay‑per‑mile system. The most recent reform has been to bring EVs into scope of vehicle excise duty (VED) from April 2025. From this date, zero emission cars have begun paying a £10 first‑year rate and the standard rate (£200 in 2026/27) thereafter. Some are subject to the expensive car supplement, depending on their list price.

Budget 2025 announcement: the creation of electric vehicle excise duty (eVED)

At the 2025 Budget, the government announced electric vehicle excise duty (eVED), a new tax payable alongside VED from April 2028. The measure would charge 3p per mile for EVs and 1.5p per mile for PHEVs. The government said this reflects the fact that plug‑in hybrids already pay fuel duty on the petrol or diesel they use. It also said that setting the rates below the equivalent fuel duty level would retain an incentive to buy EVs.

The Office for Budget Responsibility (OBR) estimated that eVED would raise £1.1 billion in 2028/29, rising to £1.9 billion in 2030/31 (PDF). It also forecast that the measure would increase the lifetime cost of owning an EV and therefore reduce demand, estimating around 440,000 fewer EV sales over the forecast period relative to its previous projection. However it added that other government measures, such as increases to the electric car grant, would offset most of this reduction.

Legislation for eVED has not yet been introduced. In July 2026 the government published the response to a consultation it launched on its proposals. It also published draft legislation for inclusion in the upcoming Finance Bill.

How electric vehicle excise duty (eVED) would work

The government envisage that motorists would estimate their annual mileage, pay tax upfront or in instalments, and then submit their actual mileage at year‑end for reconciliation. The tax would be administered by the Driver and Vehicle Licensing Agency (DVLA). Mileage checks would normally occur at the annual MOT. Keepers of cars under three years old, which do not require an MOT (four in Northern Ireland), would instead estimate their car’s mileage for the upcoming year when their VED renewal is up, based on the car’s odometer. At the first MOT, mileage would be reconciled with the estimate via a verified odometer reading. The government said it would not collect information about where or when journeys occur and will not require tracking devices.

UK‑registered cars would be liable for eVED, including mileage driven overseas. Only cars would be in scope; motorcycles and vans would not be included at the outset because the transition to electric is less advanced for those vehicle types. Cars exempt from VED would not be exempt from eVED because the tax is designed to be a broad equivalent to fuel duty.

Initial reaction to the government’s proposals

Parliamentary reaction varied. Some MPs expressed concern about timing, cost pressures on motorists and potential impacts on EV uptake, while others said the measure was necessary to address falling fuel duty receipts. Think tanks generally supported the principle of replacing lost revenue but raised concerns about timing, the flat‑rate nature of the tax and potential effects on EV demand. Industry bodies were more critical, arguing that the tax risked undermining investment and demand at a time when the EV market remains relatively small and growth uncertain.

Following the outcome of the consultation, some stakeholders were positive about the changes announced by the government, whilst still maintaining the timing to introduce such reforms could negatively impact the transition to electric vehicles.