Pay-Per-Mile Road Tax Calculator: See How Much You'd Pay

Pay-per-mile road tax is a proposed mileage-based charge for electric vehicle drivers in the UK, expected to be announced in the November 2025 Budget. The proposed rate is 3 pence per mile, which would be charged in addition to the standard £195 annual Vehicle Excise Duty (VED) that EV owners already pay This system is being called "VED+" and aims to address the decline in fuel duty revenue as more drivers switch to electric vehicles.

If approved, the pay-per-mile charge is expected to come into effect from April 2028, following a public consultation period after the Budget announcement. The government has indicated this timeline allows for proper planning and ensures the EV market has matured sufficiently.

Based on the proposed 3p per mile rate, a driver covering 8,333 miles annually would pay approximately £250 per year in addition to their £195 VED. For reference:

• 10,000 miles per year = £300 additional charge

• 12,000 miles per year = £360 additional charge

• 15,000 miles per year = £450 additional charge

Initially, the pay-per-mile charge is expected to apply only to electric vehicles. Petrol and diesel drivers will continue paying fuel duty, which currently generates over £25 billion annually for the Treasury. However, there is speculation the system could eventually expand to all vehicles as the UK transitions away from combustion engines.

No. The pay-per-mile charge would be in addition to standard Vehicle Excise Duty (VED), not a replacement. EV drivers would pay both the £195 annual VED and the mileage-based charge. This is why it's being referred to as "VED+" by industry experts.

Yes. Despite the additional charge, electric vehicles remain highly cost-effective, especially through salary sacrifice schemes. Even with an additional £250 annual pay-per-mile charge, salary sacrifice schemes save 20-50% compared to personal leasing, while EVs still offer £600-£1,500 annual fuel savings. The 3% Benefit-in-Kind rate for EVs (compared to up to 37% for high-emission petrol cars) provides substantial tax advantages that far outweigh the mileage charge.

Reports suggest drivers will estimate their annual mileage and pre-pay alongside VED, avoiding the need for GPS tracking or complex telematics systems. This approach addresses privacy concerns while keeping implementation costs manageable. Mileage may be verified at MOT or through annual self-declaration.

Hybrid vehicle owners are also expected to pay the pay-per-mile tax, though potentially at a lower rate than fully electric vehicles. Specific rates for plug-in hybrids have not yet been confirmed and will likely be detailed following the Budget announcement and consultation period.

As more drivers switch to electric vehicles, the government faces a potential £7-30 billion shortfall by 2030 from declining fuel duty revenue. Fuel duty currently generates around £25 billion annually for the Treasury. The government frames the pay-per-mile charge as a matter of fairness, ensuring EV drivers contribute to road maintenance similar to how petrol and diesel drivers pay through fuel duty.

The beauty of a mileage-based system is that lower-mileage drivers pay less. If you drive 5,000 miles annually at 3p per mile, you'd only pay £150 extra per year. Combined with salary sacrifice schemes and EV fuel savings, you'd still be significantly better off financially than running a petrol or diesel vehicle - particularly for urban drivers and those with shorter commutes.