DVLA to introduce £300 average pay per mile tax as new ‘tool’ confirmed

A new ‘tool’ is to be introduced for many drivers when a major motoring tax change is rolled out that will cost hundreds a year. Lurking in John Healey’s Budget last week was a new update on plans for a pay per mile scheme for millions of Brits. Under changes now confirmed in the Budget that have been little-noticed amid more high profile announcements on energy and tax, a new tool will be introduced for a new mileage-based charge. It’s all to do with something called eVED, which is the Electric Vehicle Excise Duty.

It will be made available for electric and plug-in hybrid cars in April 2028. There are around 2 million zero-emission Battery Electric Vehicles in the UK, the RAC says . It estimates there are a further 1m plug-in hybrids. The RAC Foundation has found average mileage for EV vehicles to be around 10,000 miles a year, and only slightly less for hybrid cars. New calculations by Octopus Electric Vehicles - part of the Octopus Energy proup - show that for an average EV motorist, the new charge being brought in in 2028 will cost them £300 a year.

And that comes on top of the £200 standard rate road tax that all drivers have to pay. Drivers will need to estimate their mileage each year to work out how much eVED to pay, separate official documents show . Ensure our latest personal finance headlines always appear at the top of your Google Search by making us a Preferred Source. Click here to activate or add us as Preferred Source in your Google search settings. Even drivers on relatively low mileage who average 5,000 miles a year in an EV would have to fork out £150 extra a year under the new system, Octopus's new estimates show.

Hybrid drivers would pay less under the tax, which will be administered by the DVLA. The government set out plans last year to phase out sales of new petrol and diesel cars from 2030. Even if those plans are watered down by Andy Burnham's government, as some expect, many more motorist will drive EVs and hybrids in the future. Consultations carried out before the Budget showed that many respondents urged the government to make sure that the new charge was not overly complicated.

There were also a number of worries voiced over privacy concerns. The tool aims to address these criticisms. The change is being made due to the way drivers are taxed in the UK. Motorists using petrol and diesel pay tax pay fuel duty that EV drivers avoid because they do not need to fill up. However, as more and more drivers move over to electric vehicles, this is leaving the government with a major gap in the money it brings in every year in tax to pay for public services.

Last year, fuel duty generated £24 billion - more than the £21 billion for the police . To make up this shortfall, the government drew up plans in the 2025 Budget to introduce a 3p per mile charge from 2028 for BEVs (battery electric vehicles), and a 1.5p per mile charge for plug-in hybrid electric vehicles. What had not been decided at that point was how eVED would work and how it would be brought in. The new details in Mr Healey’s Budget now confirm how this will be done.

The Budget papers show that the government will introduce a new mileage estimation tool when the new system begins. One feature being tested at the moment is known as benchmarking , which could help drivers unsure of their exact mileage create an estimate using information from similar vehicle types. The Budget papers explain that drivers would be able to opt in to a tool called ‘eVED Connect’. This would, the government says, make use of a vehicle’s on-board data so that drivers do not need to report their mileage annually.

The government documentation also says that officials want to introduce an automatic refund model by 2030. They say this would make refunds easier for drivers using the scheme. They say it would also make them available in more circumstances - for instance, when a driver overestimates their mileage, or where they sell their car. And the Budget says that the government will work closely with the motoring industry and motoring groups before the change begins.

It says it will also make further guidance available for fleet operators later this year. Some critics have called the changes ‘Big Brother’ politics given that petrol and diesel drivers do not need to inform the government about their mileage. Yet the government says that people will not need to report where or when vehicles are driven - or be 'required' to install a tracker. The Treasury said this week: “There will be no requirement to install trackers in cars, or report where and when miles are driven.”

But Howard Cox, the founder of the FairFuelUK campaign, told the Times: “This reeks of Big Brother Britain. Labour says it’s voluntary, but for how long? Our cars, journeys and freedom to travel are ours, not Westminster’s. Because fuel duty is effectively paid at the pumps, there’s no need for checks on whether drivers have paid it. But this will change under pay-per-mile, with a new system needed for ensuring it is paid.” The government carried out consultations on the plans after the 2025 Budget.

Paperwork published in July this year said a common concern was that it would be difficult to estimate future mileage accurately. Many respondents asked for “clear guidance to support motorists in estimating their mileage, including examples, online tools or calculators, and support tailored to different user groups and circumstances”. The July papers also noted : “Privacy was a particularly important consideration, with many respondents arguing that any technological solution should collect only the minimum information required to administer the tax and excluding data such as vehicle location, journey history or driving behaviour.”