The Treasury has revealed that the UK's car tax system is 'not fair', with petrol and diesel drivers paying around £480 per year in fuel duty while electric vehicle (EV) owners pay nothing extra for road usage. This admission comes as the government prepares to introduce a new pay-per-mile fee for EVs from 2028.
Fuel Duty Burden on Petrol and Diesel Drivers
Motorists with combustion engines pay fuel duty every time they refuel, charged at 52.95 pence per litre for standard petrol and diesel. For a typical medium family car with a 55-litre tank, this amounts to approximately £29 in tax per fill-up. Over a year, this adds up to around £480 per driver.
In contrast, EV owners currently pay no fuel duty, only covering domestic or public energy costs. This disparity has been highlighted by the Treasury as a key justification for reforming the system.
New Pay-Per-Mile Fee for EVs
Speaking exclusively to the Daily Express, a HM Treasury spokesperson stated: 'Right now, EV drivers pay no fuel duty, while petrol drivers pay around £480 a year – that’s not fair. Under the new system, EVs will pay half the duty of petrol cars – still the cheaper, greener choice.'
Chancellor Rachel Reeves has confirmed that from 2028, electric cars will be charged 3p per mile under the new electric Vehicle Excise Duty (eVED). This is roughly half the average fuel duty equivalent, meaning EV owners will still receive a discount. Plug-in hybrid owners will pay 1.5p per mile, as they also continue to pay fuel duty on some mileage.
Fiscal Sustainability and Pothole Funding
The Treasury explains that the new tax system aims to ensure a fairer transition to electric vehicles while protecting the long-term fiscal sustainability of the country. By the early 2030s, at least one-fifth of all cars on UK roads are expected to be electric, raising concerns about lost fuel duty revenue. Officials have stated that at least £1bn of extra pothole funding will be delivered thanks to the new eVED fee.
The Treasury added: '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.'
