Rachel Reeves’ Autumn Statement has officially announced the expected 3p per mile for EV drivers tax, and 1.5p per mile for hybrid drivers from 2028.
In the past few weeks, there has been speculation that this new tax will be introduced, and it has caused concern for many EV drivers.
Electric vehicles have always benefitted from the lowest tax rates, with the UK Government aiming to encourage uptake. However, as the number of EVs on the road increases, a widening hole in HM Treasury’s car tax income has prompted law makers to address the situation.
One solution – since electricity is not taxed as a fuel in the same way as petrol or diesel – is for EV drivers to pay a set price per mile driven. This aims to combat the expected £30 billion gap in public finances by the end of the current government, but will consequently add around £250 per year to the average cost of running an EV.
Projections suggest that this new tax will raise approximately £1.4 billion annually by the start of the next decade, when a ban on new petrol and diesel cars is set to come in. Much will depend on how the proposed charging system is rolled out but, regardless of implementation, a 3p per mile EV tax still sees electric cars work out cheaper to run than petrol and diesel.
The Numbers Still Add Up
Our CEO, Lash Saranna, explains: “Working on the average mileage of an EV driver, even with pay per mile pricing, driving an electric car is still far more cost effective than petrol or diesel. Opting for the salary sacrifice route makes the comparison even wider. Indeed, depending on the tax rate of the employee and the model chosen, drivers could save more than £250 in a single month, compared to more conventional leasing options.”
Don’t Let Headlines Mislead You
Lash continues: “It’s important to note that, despite headlines spreading fear and uncertainty, once you run the numbers, it remains considerably cheaper to get behind the wheel of a new or used EV through salary sacrifice.”
The transition to electric is happening, and while the tax landscape is evolving, the financial case for EVs remains strong. Whether you’re looking to reduce your carbon footprint or simply save money on running costs, electric vehicles – particularly through salary sacrifice – continue to offer exceptional value.
See our handy table to show how much EV drivers will be paying from April 2028, based on annual milage.
Annual Milage | Annual EV Tax | Monthly Equivalent |
|---|---|---|
8,000 | £240 | £20 |
10,000 | £300 | £25 |
12,000 | £360 | £30 |
As Featured In the BBC
Our co-founder Charnjit Saranna has been featured in the BBC news talking about the new pay-per-mile tax.