New Electric Car Tax UK: What the 3p-Per-Mile Charge Means From 2028
- Natalia Streeter
- 6 days ago
- 8 min read
From 1 April 2028, electric and plug-in hybrid car drivers are due to face a new mileage-based charge called Electric Vehicle Excise Duty, known as eVED. It will apply on top of existing Vehicle Excise Duty, often called road tax.
The new charge is expected to affect private motorists, sole traders, limited company directors, employers and company car drivers. The confirmed rates are 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrid cars.
The measure is being introduced as the government looks to replace some of the fuel duty revenue lost as more drivers move away from petrol and diesel vehicles. For businesses, the main message is simple: electric vehicles can still be tax-efficient, but they should no longer be treated as largely tax-free when planning future vehicle costs.
What eVED is and when it starts
Electric Vehicle Excise Duty is a new mileage-based charge for electric and plug-in hybrid cars. It is due to start on 1 April 2028.
It will be charged in addition to existing Vehicle Excise Duty. That means eVED is not replacing road tax. It is an extra charge based on the number of miles driven.
The confirmed rates are:
Vehicle type | eVED rate from 1 April 2028 |
Fully electric car | 3p per mile |
Plug-in hybrid car | 1.5p per mile |
A fully electric car driver covering 10,000 miles a year would pay £300 in eVED. A plug-in hybrid driver covering the same mileage would pay £150.
This is a key change in the wider electric car tax UK picture, especially for drivers who chose electric vehicles partly because of lower running costs.
Why the government is introducing the charge
Petrol and diesel drivers pay fuel duty when they fill up. As more cars become electric, fuel duty receipts are expected to fall.
Electric vehicles use the roads in the same way as petrol and diesel vehicles, but they do not contribute through fuel duty. The government’s position is that a mileage-based charge helps maintain revenue as the vehicle fleet changes.
That does not mean electric cars will suddenly be taxed in the same way as petrol or diesel cars. The eVED rate is a specific per-mile charge. It sits alongside existing Vehicle Excise Duty and separate company car tax rules.
For individuals and businesses, the practical issue is cost forecasting. Drivers who cover higher annual mileage will pay more than those who use their vehicles less often.
How much eVED could cost each year
The easiest way to understand eVED is to multiply the annual mileage by the relevant rate.
For a fully electric car, the rate is 3p per mile. For a plug-in hybrid, the rate is 1.5p per mile.
Annual mileage | Fully electric car at 3p per mile | Plug-in hybrid at 1.5p per mile |
5,000 miles | £150 | £75 |
10,000 miles | £300 | £150 |
15,000 miles | £450 | £225 |
20,000 miles | £600 | £300 |
These examples show why the charge will matter more for higher-mileage drivers.
A limited company director using a fully electric company car for 5,000 miles a year may see a relatively modest extra cost of £150. A sales employee or tradesperson covering 20,000 miles a year in a fully electric car could face £600 a year before considering existing VED, charging costs, insurance, repairs and lease payments.
For a plug-in hybrid, the figures are lower, but they still need to be included in any whole-life cost estimate.
How mileage is expected to be reported or checked
The detailed process for eVED administration is still expected to be confirmed before April 2028. Based on the information set out so far, the system is expected to use mileage reporting and verification rather than live vehicle tracking.
In practical terms, this is likely to involve annual mileage checks. The mileage may be reported by the vehicle keeper and checked against odometer readings, similar records or other annual vehicle data.
The key point for drivers is that the eVED system is not expected to require vehicle trackers. It should not involve continuous monitoring of where a vehicle goes.
Questions remain about the exact timing of payment, how mileage will be declared, how new and used vehicles will be treated when ownership changes, and what process will apply to cars below MOT age. These details should become clearer as the start date approaches.
For now, business owners should make sure mileage records are accurate and easy to evidence. That is already good practice for tax purposes, especially where employees claim mileage expenses or where business and private use need to be separated.
What eVED means for individuals
For private drivers, eVED adds a new annual cost to owning or leasing an electric or plug-in hybrid car from April 2028.
The effect will depend mainly on mileage. A low-mileage electric car driver may pay less than many drivers currently spend on a few tanks of fuel. A high-mileage driver may see a more noticeable annual bill.
Electric cars may still offer lower fuel costs, fewer emissions-related charges in some areas, and a different maintenance profile compared with petrol and diesel cars. The eVED charge does not remove those factors. It simply means the tax comparison becomes less one-sided.
Anyone choosing a new car on a three or four-year lease should look beyond the first year’s cost. A car ordered before 2028 may still be on the road when eVED starts. That makes electric car tax 2028 relevant to decisions being made well before the start date.
What businesses and company car drivers need to know
For businesses, the new mileage charge could affect the overall cost of running electric cars and plug-in hybrids.
This matters for:
Company cars provided to directors or employees
Electric pool cars
Business vehicles used by sole traders
Leased vehicles used for business journeys
Salary sacrifice arrangements involving electric cars
Employees comparing company cars with cash allowances
A business running one electric company car at 10,000 miles a year may need to budget an extra £300 a year from April 2028. A small fleet of five fully electric cars at 15,000 miles each could face a combined eVED cost of £2,250 a year.
That may not change the decision to use electric vehicles, but it should be included in forecasts.
eVED is separate from Benefit in Kind tax
Company car drivers should not confuse eVED with Benefit in Kind, often called BIK.
BIK is the tax an employee or director pays when they have private use of a company car. It is based on factors such as the car’s list price, CO2 emissions and the relevant company car percentage for the tax year.
Employer National Insurance can also arise on taxable company car benefits.
eVED is different. It is a mileage-based vehicle charge linked to the car’s use from April 2028. It does not replace BIK, and it does not change how the company car benefit is calculated.
That means a company car can potentially involve several separate tax and cost areas, including:
Vehicle Excise Duty
Electric Vehicle Excise Duty from April 2028
Benefit in Kind tax for private use
Employer National Insurance on company car benefits
Lease payments or finance costs
Electricity costs and charging arrangements
Insurance, servicing and repairs
Capital allowances or tax relief, depending on ownership and use
These costs interact with each other, but they are not the same tax.
Electric vehicles can still offer tax advantages
The introduction of eVED does not mean electric vehicles stop being attractive for tax planning.
Electric company cars have often been popular because they can produce a lower BIK charge than many petrol or diesel alternatives. Businesses may also be able to access tax relief depending on how the vehicle is purchased, leased and used.
Employees can also benefit where electric company car arrangements produce lower personal tax costs than comparable vehicles with higher emissions.
The point is not that electric vehicles are no longer worthwhile. The point is that the calculation needs to be complete.
A sensible total cost review should include:
The expected annual mileage
The eVED charge from April 2028
Existing VED
Lease or purchase cost
Charging costs at home, work and public chargers
BIK tax for employees or directors
Employer National Insurance
VAT treatment where relevant
Capital allowance position
Insurance and maintenance
Expected resale value or end-of-lease terms
A low BIK rate can be valuable, but it should not hide other costs. A vehicle that looks cheap for tax purposes may still be expensive once mileage, charging, finance and insurance are included.
Practical examples for businesses
A limited company is considering an electric car for a director. The expected mileage is 8,000 miles a year. At 3p per mile, the eVED charge from April 2028 would be £240 a year.
That charge would sit alongside the director’s company car BIK position, the company’s lease or purchase costs, employer National Insurance and normal running costs.
A sole trader uses a plug-in hybrid for mixed business and private travel and covers 15,000 miles a year. At 1.5p per mile, the annual eVED charge would be £225. The tax treatment of the vehicle and running costs would still depend on the business use, records and wider tax position.
An employer with ten electric company cars averaging 12,000 miles a year would face eVED of £3,600 a year from April 2028, based on 120,000 total miles at 3p per mile. That figure may be manageable, but it belongs in the fleet budget.
These examples are simple illustrations. The actual tax treatment will depend on the vehicle, ownership structure, business use and rules in force at the time.
What businesses should do before April 2028
There is time to prepare. The start date is not until 1 April 2028, but many vehicle decisions are made years in advance through lease agreements and fleet policies.
Business owners should consider the following steps.
Review expected mileage
Look at actual annual mileage for company cars and business vehicles. The higher the mileage, the more eVED matters.
Update vehicle cost forecasts
Add eVED to forecasts for vehicles that may still be in use from April 2028 onwards.
Separate employee tax from vehicle running costs
Make sure directors and employees understand that BIK and eVED are different. One affects the taxable benefit. The other is a mileage-based vehicle charge.
Check record-keeping
Accurate mileage records will help support business cost claims and prepare for any annual mileage reporting.
Review salary sacrifice and company car schemes
If electric cars are offered through a scheme, estimate how eVED affects the total package.
Take advice before committing to a vehicle
A tax-efficient vehicle choice depends on more than the fuel type. It depends on how the vehicle is used, funded and reported.
Frequently asked questions
Does eVED replace road tax?
No. eVED is due to apply in addition to existing Vehicle Excise Duty from 1 April 2028.
What is the eVED rate for electric cars?
The confirmed rate for fully electric cars is 3p per mile.
What is the eVED rate for plug-in hybrids?
The confirmed rate for plug-in hybrid cars is 1.5p per mile.
Will eVED require a tracker in my car?
No. The system is expected to use mileage reporting and annual checks. It is not expected to require vehicle trackers.
Is eVED the same as company car tax?
No. eVED is separate from Benefit in Kind tax and other company car tax rules. Company car drivers may still have BIK to consider where they have private use of a company car.
The key takeaway for business owners and drivers
The new eVED charge is a planned shift in how electric and plug-in hybrid cars are taxed from 1 April 2028. For many drivers, the annual cost may be modest. For higher-mileage drivers and businesses running several vehicles, it could become a meaningful budget item.
Electric vehicles can still be tax-efficient for companies and employees, but the decision should be based on total cost of ownership. That means looking at eVED, VED, BIK, employer costs, charging, finance, VAT, capital allowances and mileage patterns together.
This article is for general information only and should not be treated as personal tax advice.
For support with company car taxation, allowable business costs and tax planning, contact Beyond Bookkeeping Accountants to review your vehicle options before committing to your next electric or plug-in hybrid car.
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