The confirmation of a new pay-per-mile tax on EVs has provoked criticism and calls for collaboration from the fleet industry.
The measure was the most significant motoring announcement in Chancellor of the Exchequer Rachel Reeves’ Budget, delivered yesterday.
Electric cars will be taxed at 3p-per-mile from April 2028, while plug-in hybrids will be subject to a 1.5p-per-mile charge. The charges will be payable alongside Vehicle Excise Duty.
The Budget also included a continuing fuel duty freeze, although the extra 5p reduction introduced in 2022 will be phased out from September next year.
There’s also an increase to the threshold for the Electric Car Supplement on EVs to £50,000, and an extra £1.3 billion in funding for the Electric Car Grant, which has been extended until 2030.
An extra £200 million has been announced for EV charging infrastructure, and proposed changes to the Employee Car Ownership Scheme have been delayed.
Reacting to the Budget, Jon Lawes, managing director of leasing company Novuna Vehicle Solutions, said: “New costs for EV drivers risk undermining confidence just as the Government allocates substantial additional funding for the electric car grant scheme. EVs have only recently lost their VED exemption, and while upping the threshold to £50,000 for the Expensive Car Supplement is welcome, the confirmation of the pay-per-mile charge effectively turns this into VED-plus.
“The new subsidies are welcome, but set against these tax changes, it still feels like one step forward and two steps back. If the government is serious about reaching its ZEV mandate targets, it must fix the basics: high upfront costs, inconsistent charging access, and higher prices for drivers without home charging.
“Without a coherent strategy, the positive impact of subsidies risks being cancelled out by inconsistent policymaking that slows the transition and weakens progress towards the Government’s own targets.”
David Bushnell, director of consultancy and strategy for fleet management company Fleet Operations, said the new pay-per-mile charge for EVs and PHEVs was “particularly concerning”, adding: “This increases the lifetime cost of owning an EV and by the government’s own admission, will lead to around 440,000 fewer electric car sales over the forecast period, reducing demand and destabilising used values.
“Movement on the expensive car supplement threshold, from £40,000 to £50,000, offers some limited relief, but at the same time, it will unnecessarily penalise used buyers, with some nearly identical used vehicles being treated differently, purely based on the registration date.
“Taken together, these measures will make electrification harder, not easier. Businesses are ready to invest in cleaner vehicles, but today’s Budget sends mixed signals. It highlights the growing imbalance between fiscal tightening and the need for long-term investment in sustainable transport.”
On the new EV charge, Association of Fleet Professionals (AFP) chair Paul Hollick said: “This idea has been mooted ever since fleets started adopting electric cars in large numbers and was widely trailed in the press ahead of the Budget. What is needed now is a conversation across the fleet sector about what we want from such a scheme in terms of its timetable and implementation – a dialogue where we expect the AFP to take a central role.
“Initially, our main concern is that it shouldn’t arrive in a form that could hamper electrification or cause any hesitation among potential business and private EV buyers. We’re looking at a point two-and-a-half years away, which at least creates time and space for serious discussion.”
Hollick added that the extra funding for the Electric Car Grant was welcome. However, he criticised the announcement on fuel duty, describing the increases from next September as: “Probably unexpected and definitely unwelcome at a time when fleet spending is under pressure.”
He added: “While we welcome the idea of a national fuel finder that will make lower prices easier to access, we strongly urge the Chancellor to rethink.”
Giving his Budget reaction, Ross Palman, EV project lead for fleet management company Holman, said that fleets faced a challenge from a lack of definitive detail contained in the Budget measures.
He continued: “They remain well-intentioned proposals, but in the case of eVED, they could actually hinder electrification if implemented poorly.
“In its current form, the eVED consultation suggests that drivers, leasing companies, and employers may all require separate processes for estimating, paying, and validating mileage. This risks adding complexity, administrative burden, and confusion before even considering the impact on running costs.
“As a funding and fleet management business committed to delivering transparency and trust for our customers, we are eager to work with the government to design a system that fairly taxes electric vehicles without compromising progress toward decarbonisation.”
