The UK government has announced a new per-mile tax for electric vehicles and plug-in hybrids, set to take effect from April 2028. If you're considering an EV through a salary sacrifice scheme—or already driving one—here's everything you need to know about what's changing, when, and crucially, whether EVs still make financial sense.
What's Been Announced
Let's start with the facts. From April 2028 (that's over three years away), the government will introduce:
- Electric vehicles (EVs): 3p per mile charge
- Plug-in hybrids (PHEVs): 1.5p per mile charge
- This is IN ADDITION to the standard Vehicle Excise Duty (VED) of £195 per year that EVs will already be paying from April 2025
For context, the average UK driver covers around 8,500 miles per year. Under this new system, that would mean:
- EV drivers: ~£255 extra per year (on top of £195 VED)
- PHEV drivers: ~£127 extra per year (on top of £195 VED plus fuel duty on petrol miles)
Important: This is NOT happening immediately. You have over three years before these charges take effect.
Why This Is Happening
The government faces a significant fiscal challenge. As more drivers switch to electric vehicles, revenue from fuel duty—currently around £25 billion annually—is declining. Fuel duty has been frozen since 2010, and with EVs paying no fuel duty at all, there's a growing hole in public finances.
For years, EVs have enjoyed preferential treatment:
- £0 VED (ending April 2025)
- Generous grants for vehicle purchase (now ended)
- Ultra-low BiK rates for company cars (2% in 2024/25, rising to 3% in 2025/26)
This new per-mile charge is the government's way of replacing some of that lost fuel duty revenue as the country transitions away from petrol and diesel. Whether you agree with the approach or not, the fiscal reality is undeniable: the money needs to come from somewhere.
The Public Response: Concerns and Controversies
The announcement has sparked considerable debate in the motoring community, with several legitimate concerns raised:
Implementation Worries
Perhaps the biggest question mark hangs over enforcement. How exactly will the government track your mileage?
- MOT records? Seems logical, but new cars don't need an MOT for three years, creating a significant enforcement gap
- Self-reporting? Open to fraud and creates administrative burden
- GPS tracking? Raises serious privacy concerns and public resistance
There's also the thorny issue of miles driven abroad. If you take your EV on a European road trip, will you be charged for those miles too? That would effectively mean paying tax twice—once to the UK and tolls/fuel taxes to the countries you're visiting.
Many are concerned about the potential rise in "mileage blockers"—devices that interfere with odometer readings—creating a new avenue for tax evasion.
Economic Concerns
The structure of the tax has raised eyebrows:
- "Double dipping": EVs will pay VED (£195), per-mile charges, AND tax on electricity used for charging
- PHEVs hit hardest: They'll pay fuel duty on petrol miles AND the per-mile charge on ALL miles, potentially making them more expensive to run than pure EVs or pure petrol cars
- Removes incentive: When EV upfront costs are already £5,000-15,000 higher than petrol equivalents, this narrows the economic advantage
- Environmental impact: Could slow EV adoption just when the UK needs to accelerate it to meet 2030 climate targets
Fairness Questions
There's a broader sense of frustration about how motoring is taxed:
- Income tax thresholds have been frozen, but this new tax will rise with inflation
- Motorists often feel they're the "easy target" for treasury revenue
- This feels like a "rug pull"—the government spent years encouraging EV adoption, only to remove the financial benefits
- Echoes of the diesel debacle, where drivers were encouraged to buy diesel cars, only to face penalties later
These aren't the complaints of unreasonable people—they're valid concerns about policy consistency and fairness.
Impact on EV Salary Sacrifice Economics
Let's look at the actual numbers. We'll compare current costs, 2028 projected costs, and petrol equivalent costs to see if EVs still make sense.
Example 1: Tesla Model 3 (Basic Rate Taxpayer, 12,000 miles/year)
Current Situation (2024/25):
- VED: £0
- BiK tax (2% × £45,000 × 20%): £180/year
- Home charging (3.5 miles/kWh, 7p/kWh): £240/year
- Total: £420/year
From 2028:
- VED: £195
- BiK tax (3% × £45,000 × 20%): £270/year
- Per-mile charge (12,000 × £0.03): £360/year
- Home charging: £240/year
- Total: £1,065/year
Petrol Equivalent (BMW 330i, 45mpg):
- VED: £195
- Fuel cost (12,000 miles at 45mpg, £1.45/litre): £1,767/year
- Total: £1,962/year
Result: EV still £897/year cheaper
Example 2: BMW i4 (Higher Rate Taxpayer, 20,000 miles/year)
From 2028:
- VED: £195
- BiK tax (3% × £53,000 × 40%): £636/year
- Per-mile charge (20,000 × £0.03): £600/year
- Home charging: £400/year
- Total: £1,831/year
Petrol Equivalent (BMW 340i, 40mpg):
- VED: £195
- Fuel cost (20,000 miles at 40mpg): £3,317/year
- Total: £3,512/year
Result: EV still £1,681/year cheaper
Example 3: BMW 330e PHEV (15,000 miles/year, 60% electric)
This is where it gets complicated:
From 2028:
- VED: £195
- BiK tax (8% × £43,000 × 40%): £1,376/year
- Per-mile charge on ALL miles (15,000 × £0.015): £225/year
- Charging (9,000 electric miles): £180/year
- Fuel for 6,000 petrol miles (including fuel duty): £520/year
- Total: £2,496/year
The problem? You're paying fuel duty on your petrol miles AND the per-mile charge on those same miles. This double taxation makes PHEVs look increasingly uneconomical unless you're doing a very high percentage of electric-only driving.
Use our salary sacrifice calculator to model your specific situation.
Should You Still Consider EV Salary Sacrifice?
Despite the new tax, the answer for most people is still yes—but it depends on your circumstances.
If You're Deciding Now (2024-2027)
You have over three years before per-mile charges kick in. If you're ordering an EV through salary sacrifice now:
- Current BiK rates (2-3%) are historically low
- You'll lock in savings for your entire lease period (typically 2-4 years)
- You might complete your entire lease before the new charges begin
- Home charging remains dramatically cheaper than petrol
Even with the 2028 changes, EVs remain substantially cheaper to run than petrol equivalents for most drivers, as our examples above show.
Calculate your potential savings with our calculator
For High-Mileage Drivers
If you're covering 20,000+ miles annually, the per-mile charge will add up:
- 20,000 miles = £600 extra per year
- 30,000 miles = £900 extra per year
However, high-mileage drivers also pay more in fuel duty for petrol cars. At 20,000 miles and 40mpg, you'd pay roughly £1,100 in fuel duty alone on a petrol car. So even high-mileage EVs remain significantly cheaper, though the gap does narrow.
The PHEV Dilemma
PHEVs are in the most complicated position. You'll be paying:
- Fuel duty on the petrol you use
- Per-mile charges on ALL miles (including those petrol miles)
- Higher BiK rates than pure EVs (5-8% vs 3%)
PHEVs only make economic sense if you're doing 70%+ of your miles on electric power. For many company car drivers who never plug in, PHEVs could actually become more expensive to run than either pure EVs or pure petrol cars.
What Employers Should Consider
If you run a salary sacrifice scheme:
- The schemes remain highly attractive for the next 3+ years
- Communicate the 2028 changes clearly to employees
- Most lease periods (2-4 years) mean current participants may not be affected
- You may need to adjust how schemes work post-2028, but there's time to plan
- The tax advantages of salary sacrifice still apply to these new charges
What Happens Next
Here's the timeline:
- April 2025: EVs start paying £195 VED, BiK rate rises from 2% to 3%
- April 2028: Per-mile charges begin (if implemented as planned)
But there's important context: this is over three years away, and a lot can happen:
- Implementation details are still unclear (how will mileage actually be tracked?)
- The policy could be modified, delayed, or even cancelled depending on future governments
- Watch for updates in the 2025, 2026, and 2027 budgets
What You Can Do
- Use our calculator to understand your savings with today's rates
- If you're ordering an EV now, you'll enjoy years of low taxation before 2028
- Monitor government announcements for implementation details
- Consider lease terms—2-4 year cycles mean you might complete a lease before charges begin
- Don't let 2028 concerns stop you benefiting from excellent savings available today
Calculate your EV salary sacrifice savings now
The Bigger Picture
It's worth stepping back from the immediate frustration to see the wider context:
The UK government remains committed to ending new petrol and diesel car sales by 2030 (though this has been pushed back from 2030 to 2035). EV infrastructure continues to improve, with thousands of new charging points added annually. BiK rates, while rising, remain extremely favorable compared to petrol and diesel alternatives and are guaranteed to stay relatively low through 2028.
This tax change, frustrating as it may be, is part of the inevitable normalization of EV taxation. Every country with significant EV adoption is grappling with the same challenge: how to fund roads when fuel duty disappears? Norway, the Netherlands, and other EV leaders have faced similar questions.
The tension between environmental goals and fiscal reality isn't going away. The government wants people to buy EVs for climate reasons, but it also needs to fund public services. This per-mile charge is an attempt to square that circle—though the execution and communication could certainly have been better.
Conclusion
Yes, a new per-mile tax is coming for EVs and PHEVs. Yes, it's frustrating, especially after years of government encouragement to go electric. Yes, the implementation details raise legitimate questions.
But here's the reality: even with these changes, EVs through salary sacrifice remain one of the best financial deals available for company car drivers. The tax advantages are significant, the running costs are a fraction of petrol alternatives, and you have over three years before the new charges even begin.
If you've been considering an EV salary sacrifice scheme, don't let 2028 concerns stop you from enjoying substantial savings available right now. The economics still stack up heavily in EVs' favor.
Want to see exactly how much you could save? Use our calculator to model your specific situation with current tax rates and see the benefits for yourself.
For more information on how BiK rates work, read our complete guide to BiK rates. And if you're new to salary sacrifice, check out our complete guide to EV salary sacrifice.
