Rachel Reeves is reportedly drafting plans for a new pay-per-mile tax targeting electric vehicles (EVs), expected to feature in the upcoming UK budget. The proposed charge set at around 3p per mile could cost EV owners between £250 and £300 annually by 2028. Hybrid cars would also face a smaller levy. The policy aims to offset the sharp decline in fuel duty revenue as more motorists transition to cleaner energy vehicles, potentially plugging a fiscal gap of up to £30 billion by the end of the parliamentary term.

According to Treasury officials, the proposal is driven by fairness, as petrol and diesel car owners currently pay an average of £600 yearly in fuel duty an equivalent absent for EVs. A government spokesperson explained that the reform seeks to create a "level playing field" among drivers. The scheme is set to begin in 2028 after a public consultation, coinciding with projections that up to six million EVs will be on UK roads, compared with the current 1.3 million.

The concept of a road-pricing scheme isn’t new; think tanks like the Campaign for Better Transport and the Tony Blair Institute have previously supported similar measures to sustain public finances. However, the plan has long been viewed as politically risky. Reeves’ move, coming months after she said she was “not looking at road pricing,” has drawn fierce Tory criticism, with opponents branding it a “poll tax on wheels.”

Motoring associations have expressed strong concerns. The AA president, Edmund King, warned that such a tax could discourage EV adoption, noting that the Zero Emission Vehicle (ZEV) mandate of 28% new EV sales this year is unlikely to be met, with current sales around 22%. Similarly, Ginny Buckley, CEO of Electrifying.com, criticized the government for mixed messaging, arguing the tax penalizes early adopters who switched based on promised long-term savings.

Under the proposed system, EV drivers would estimate their annual mileage and make an upfront payment alongside vehicle excise duty (VED), with options to top up or roll over unused credits. Examples include £12 for a London-to-Edinburgh trip or £2 between Liverpool and Leeds. Although the UK government maintains its commitment to electric mobility pledging £4 billion in EV infrastructure and grants, it insists that future transport funding must balance environmental goals with fiscal sustainability.