The UK government announced a mileage-based tax on electric vehicles in the Budget of 26 November 2025, alongside additional funding for the Electric Car Grant1. The electric vehicle excise duty (eVED) will come into effect in April 2028 at a rate of 3p per mile for battery electric vehicles and 1.5p per mile for plug-in hybrid cars, according to the Office for Budget Responsibility report accompanying the Budget1. The Budget red book says this will mean the average driver of a battery electric vehicle paying "around £240 per year", roughly half the rate of fuel duty paid per mile by petrol and diesel car owners1. Hive, a charger manufacturer, puts the figure at around £270 per year for 9,000 miles, added to the £195 annual Vehicle Excise Duty2. Indra, another charger maker, says the charge adds £250 to £300 per year for many drivers3. The Budget states there will be no requirement to report where or when miles are driven, or to install trackers in cars, and that a consultation will be published on implementation1.
The Budget also raised the threshold at which EV owners pay the Expensive Car Supplement from £40,000 to £50,000 from April 20261, and provided an extra £1.3bn for the Electric Car Grant, extending it to 20303. Indra reports the grant offers discounts of £1,500 to £3,750 depending on sustainability criteria, that it has supported around 35,000 new EVs since launching in summer 2025, and that only a small subset of models, around 30 to 35, qualify, with just two receiving the full £3,7503.
On household energy costs, the Treasury will cover three-quarters of the cost of the renewables obligation for households for three years from April 2026, and the energy company obligation ends when its current programme wraps up at the end of the financial year1. Carbon Brief calculates these changes cut typical dual-fuel bills by around £134 per year from April 2026, and cut domestic electricity unit prices by around 4p per kilowatt hour, roughly 16%, from 28p to around 23p1. Indra cites a reduction of around £150 in annual energy bills and a possible 3 to 4p per kWh reduction3. The Budget includes an extra £1.5bn for the warm homes plan to cover the additional cost of taking over from ECO1.
The Society of Motor Manufacturers and Traders reported that November new car registrations fell by 1.6% to 151,154 units, the sixth fall of the year, driven by a 5.5% decline in private demand4. Battery electric vehicles took 26.4% share, up from 25.1%, but volume growth of 3.6% was the weakest in almost two years4. Electrified vehicles reached a record 51.4% share for the year, and 426,209 BEVs joined the road in the first 11 months, a 22.7% year-to-date share against a 28% annual government target4.
"Even in a fragile market, zero emission vehicle uptake continues to rise, which is exactly what we need. But the weakest growth for almost two years, ahead of government announcing a new tax on EVs, should be seen as a wake-up call that sustained increase in demand for EVs cannot be taken for granted."
| Measure | Detail | Date |
|---|---|---|
| eVED, battery electric | 3p per mile | April 20281 |
| eVED, plug-in hybrid | 1.5p per mile | April 20281 |
| Expensive Car Supplement threshold | £40,000 to £50,000 | April 20261 |
| Electric Car Grant funding | extra £1.3bn, extended to 2030 | announced 26 November 20253 |
| Renewables obligation, Treasury share | three-quarters of cost | three years from April 20261 |
Why it matters for households
For a household running an electric car, the eVED introduces a new annual cost tied to mileage rather than fuel, on top of the £195 VED that EVs began paying in April 20251. The Budget's own figures put this at around £240 a year for an average battery electric driver1, with charger makers estimating £250 to £3002. Against that, the Budget's changes to levies on electricity bills reduce the unit cost of powering a home and a car from the grid, which matters more to a household that charges at home than to one that does not1. The Expensive Car Supplement change lifts more electric models out of the supplement from April 20261. The Budget states the eVED revenue will support road maintenance, with £2bn in annual investment by 2029-30 for local authorities1. The Office for Budget Responsibility states the charge "is likely" to reduce demand for electric cars by increasing their lifetime costs1. The SMMT says the proposals will quash demand and endanger the EV transition4. The regulation-policy hub covers how such measures are set and changed.
What happens next
A consultation will be published seeking views on the implementation of eVED1. The Expensive Car Supplement threshold change takes effect from April 2026, and the renewables obligation support from April 20261. The eVED comes into effect in April 20281. The Budget extends the fuel duty freeze until September 2026, with a plan to gradually return rates to March 2022 levels by March 20271. Hive states the temporary 5p fuel duty cut is removed in 20262.