The Government has been warned that Chancellor Rachel Reeves' proposed pay-per-mile tax on electric and hybrid vehicles, scheduled for April 2028, could cost the UK economy billions and damage EV sales, according to industry experts.
Policy details and economic concerns
Ms Reeves unveiled the policy in the November 2025 Budget, with implementation planned for April 2028. Under the measure, EV drivers will face charges of 3p per mile, while hybrid drivers will pay 1.5p per mile. The Treasury estimates this will generate £1.1 billion in 2028-29, rising to £1.9 billion by 2030-31.
However, fresh analysis by Beama, the trade association representing energy infrastructure firms, disputes these projections. The organisation argues that the Treasury could forfeit £630 million in VAT revenue in 2028 alone, primarily because drivers will be discouraged from transitioning to EVs.
Worst-case scenario
Beama further outlined a worst-case scenario where consumers also delay purchasing petrol and diesel cars ahead of the prohibition on new sales of such vehicles, potentially inflicting a total blow to the UK economy of up to £4.8 billion.
In correspondence to Dan Tomlinson MP, the exchequer secretary, Matt Adams of Beama wrote: "Introducing the pay-per-mile policy early is a fiscal own goal. It will slow EV uptake, reduce EV charging investments and cost the UK economy more than the Treasury stands to raise with the taxation."
International precedents
The correspondence, co-signed by ChargeUK, EVA England and the Renewable Energy Association, cited international precedents. It highlighted how comparable programmes in Iceland and New Zealand resulted in EV sales plummeting by 75 per cent and 50 per cent respectively during 2024.
A Treasury spokesperson responded: "This Government is committed to the EV transition, boosting support to save drivers up to £3,750 on a new car and investing over £3 billion into UK manufacturing and more charging points."
