Electric vehicle (EV) drivers face an extra cost of around £317 a year when the government's pay-per-mile tax is introduced in April 2028, according to new leasing data. The figure comes despite Chancellor John Healey extending the 5p fuel duty cut in the Budget.
Fuel duty cut extended but EV tax confirmed
In last week's Budget, Chancellor John Healey extended the 5p fuel duty cut until at least July 2027, keeping duty at 52.95p a litre for petrol and diesel. Duty on motor fuels has been frozen since 2011, apart from the temporary cut introduced in 2022 when oil prices spiked after Russia's full-scale invasion of Ukraine.
The freeze has been extended by successive governments. Conflict in the Middle East has pushed up oil prices this year, with the RAC motoring body reporting that the average pump price of diesel in Britain hit record highs in recent weeks.
However, the news was less positive for EV owners. Healey also confirmed that the 3p-a-mile tax on electric vehicles remains on track for introduction in April 2028.
What the tax means for EV drivers
Hippo Leasing's own lease data gives a clear picture of the impact. The average business EV lease it arranges covers 10,578 miles a year, so the pay-per-mile charge works out at around £317 a year, or £26 a month on top of a typical £499 payment. Over the same distance, a 45mpg petrol car pays around £566 in fuel duty before VAT, meaning electric drivers pay just over half as much.
Surveys conducted ahead of the Budget suggested drivers were holding off, but that is not reflected in Hippo's figures. Enquiries in the first three weeks of October ran 7 per cent ahead of last October, and are up 13 per cent on 2025 so far this year.
Industry reaction
Tom Preston, chief executive officer at Hippo Leasing, said that while the Budget was "welcome" for those with diesel or petrol cars, it was less good news for EV owners.
"Extending the fuel duty cut is welcome and will give petrol and diesel drivers short-term relief at a time when they're already struggling with higher household costs," he said. "Customers who gave us a monthly budget this year said that they could only spend £376 on average. For someone doing 10,000 miles a year in a 45mpg petrol car, the 5p cut is worth around £60 a year. Although the extension only pushes the rise back to next summer.
"The lack of visibility on company car tax after 2030 could be a real headache for fleets. This means anyone deciding between electric and petrol for a three or four-year lease next year will spend the tail end of their contract not knowing what they'll be paying on tax.
"Meanwhile, the pay-per-mile charge still starts in April 2028, which means anybody taking out an EV lease will have to factor in an extra £25 or so a month. So that's definitely worth building into your monthly budget from the start. At a time when four in 10 of our finance deals need zero deposit just to keep entry costs manageable, an extra £300 a year in running costs will carry real weight when it's time to renew."
