what it means for vans, fleets and drivers
Pay-per-mile EV tax: good news for vans, mixed news for everyone else
The government’s proposed pay-per-mile EV tax has landed like a flat battery across much of the automotive world. One group, though, is quietly relieved. Currently under the plans being mooted, electric vans are expected to avoid the new charge, while electric cars and many plug-in hybrids are according to reports set to be brought into scope from 2028.
So what is actually being proposed, and what might it mean for UK drivers and motor trade businesses?
What is the pay-per-mile EV tax meant to do?
Chancellor Rachel Reeves is expected to confirm a 3p-per-mile charge for zero-emission cars in her November 26th Budget, with the scheme pencilled in to start in 2028 following consultation.
The logic is simple enough. As drivers switch from petrol and diesel to electric vehicles, traditional fuel duty receipts fall. Various estimates suggest a multi-billion pound annual gap opening up in the public finances as a result, with the Treasury looking for a replacement that feels “fair” between different types of drivers.
Under the model being discussed, EV and some hybrid motorists would estimate their annual mileage, pay upfront, then reconcile later based on actual odometer readings submitted through an online portal. Mileage would also be checked against MoT records to spot any obvious discrepancies.
Electric vans swerve the charge, plug-in hybrids do not
For now, electric vans are reported to be “out of scope” for the pay-per-mile EV tax. That will be welcome news to businesses that have already invested heavily in electric LCVs, especially in urban areas with clean air zones and tight delivery windows.
Plug-in hybrid vehicles are in a different position. Early briefings suggest PHEVs would face the levy at a discounted rate, meaning many drivers could pay both fuel duty on petrol and a per-mile charge. That is one reason the scheme is already being labelled a “bureaucratic nightmare” by some industry voices.
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Industry reaction: the wrong tax at the wrong time?
Reaction from manufacturers and trade bodies has been pretty blunt. The Society of Motor Manufacturers and Traders has warned that a pay-per-mile levy on EVs would be “entirely the wrong measure at the wrong time”, arguing it risks slowing already fragile demand just as brands are pushing hard to meet zero emission vehicle sales targets.
Trade media reports also highlight concerns from finance and retail sectors. Commentators point out that EVs have already lost their exemption from Vehicle Excise Duty, and that company car tax is rising for many electric models. Layering on a new running cost is seen as one policy shift too many in quick succession.
There is public scepticism too. Fresh YouGov polling suggests 43% of Britons support taxing EVs by distance travelled, while 34% oppose it and almost a quarter are unsure. That split underlines how sensitive any change to EV incentives can be.
What this could mean for fleets, van drivers and PHEV owners
For businesses running electric vans, the immediate message is cautiously positive. If the exemption holds, operators could find themselves in a relatively strong position, especially where vehicles spend a lot of time in congestion zones or low-emission areas. They would still need to factor in VED and other running costs, but not the extra 3p per mile that many electric car drivers are likely to face.
For company car fleets and private motorists in EVs, the picture is more complicated. A typical driver is expected to pay around £250 a year in pay-per-mile charges at the proposed 3p rate, on top of existing taxes. High-mileage users, such as sales reps and some taxi or PHV drivers using electric cars, could see a noticeable jump in annual motoring costs.
Plug-in hybrid drivers sit awkwardly in the middle. Many chose PHEVs as a lower-risk step towards full electrification. If they end up paying fuel duty and a distance-based tax, some may feel they are carrying the worst of both worlds.
EV road pricing, ZEV targets and what to watch next
One big unanswered question is how the EV road pricing scheme will interact with ZEV mandate targets. Manufacturers are already working to hit rising minimum EV share requirements, with penalties for missing them. If running costs for electric cars move closer to combustion models, the pace of adoption could slow, putting extra pressure on those targets.
For now, this remains a proposal rather than final law. There will be a consultation period and, given the strength of industry reaction, plenty of lobbying around exemptions, rates and how data is collected.
For drivers and businesses, the key will be to keep an eye on three things:
- Whether the van exemption survives intact
- How plug-in hybrid tax rules are drawn up
- What support, if any, is offered alongside the pay-per-mile EV tax to keep the transition on track
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