In bringing in a mileage-based charge for electric and plug-in hybrid car drivers from 2028, the Government will require all types of electric car drivers to be subject to Tan annual check, either via existing MOT tests, or for new cars through an annual check procedure which is expected to be carried out at MOT stations.

Dubbed 'eVED’, the mileage-based tax will equal 3p per mile for battery electric cars and 1.5p per mile between the 2028 and 2029 financial year. Electric vans, trucks and motorcycles will initially be exempt from the charge.

The Office for Budget Responsibility (OBR) estimates that an electric car driver travelling 8,500 miles during this period will pay an additional £255 from the mileage-based charge and roughly the equivalent of half the rate of fuel duty tax paid by petrol and diesel car drivers.

Drivers will be expected to self-report their mileage by estimating the distance they will travel each year and either paying up front of paying monthly via Direct Debit.

“The Government will be aware that taxing all plug-in vehicles per mile from 2028 could slow down the transition to electric vehicles. This is no doubt why it has expanded the Electric Car Grant,” Simon Williams of the RAC said. “We note the Government hasn’t cut VAT on public charging from 20% to 5% to match the rate levied on domestic electricity. This means drivers who can’t charge at home will continue to pay more."

In an effort to mitigate the new mileage-based charge for EVs, the Chancellor will be increasing incentives to purchase electric vehicles. The headline in this is a change to the Expensive Car Supplement (ECS), also known as the ‘luxury car tax’, exclusively for electric cars.

The ECS currently applies to all cars with a list price in excess of £40,000. Applying from the second year the car is first registered, it adds an extra £425 per year on top of the standard rate for five years.

From April 2026, the list price threshold at which electric cars are subject to the tax increases from £40,000 to £50,000, meaning a lot more buyers of new EVs can avoid the charge.

The UK's Electric Car Grant, which gives discounts of up to £3,750 off the list price of eligible EVs, has received £300m in additional funding to allow it to continue until 2030.

The government also intends to review electric car charging prices at public chargers, which substantially increased in the last few years. A review will start in the first quarter of 2026 and be released in the third quarter. It will look at the impact of energy price increases as well as other contributors to the cost of public charging (such as the 20 percent VAT charge and the cost of National Grid connections) and consider options to lower the cost.

Alongside this, additional funding to the tune of £200m will be provided to increase provision for EV charging and enable the UK to hit its target of 300,000 chargepoints by 2030. This includes support for both home and workplace charger installation.

Furthermore, businesses with EV chargers installed will have 100 per cent business rate relief for 10 years. This includes public charging networks, who would have had to pass the cost of these business rates on to consumers.

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