The Government has been warned that Rachel Reeves’ pay-per-mile electric vehicle tax, due in April 2028, could cost the UK economy billions and damage EV sales, according to industry experts
Chancellor Rachel Reeves has been cautioned that proposals to implement a pay-per-mile levy on electric and hybrid vehicle drivers could trigger severe economic repercussions.
Ms Reeves unveiled the policy in the November 2025 Budget, with implementation scheduled for April 2028. However, on Monday, the Government was alerted that the scheme could harm EV sales and ultimately drain public finances rather than bolster them.
Under the measure, EV motorists will face charges of 3p per mile, while hybrid drivers will pay 1.5p.
According to Business Matters magazine, the Treasury estimates this will generate £1.1billion in 2028-29, rising to £1.9bn by 2030-31. Yet this projection has now been disputed by industry experts.
Fresh analysis by Beama, the trade association representing energy infrastructure firms, has argued that the Treasury could forfeit £630m in VAT revenue in 2028 alone, primarily because drivers will be discouraged from transitioning to EVs.
The organisation further outlined a worst-case scenario, where consumers also delay purchasing petrol and diesel cars ahead of the prohibition on new sales of such vehicles, potentially inflicting a total blow to the UK economy of up to £4.8bn.
In correspondence to Dan Tomlinson MP, the exchequer secretary, Matt Adams of Beama wrote: “Introducing the pay-per-mile policy early is a fiscal own goal. It will slow EV uptake, reduce EV charging investments and cost the UK economy more than the Treasury stands to raise with the taxation.”
The correspondence, co-signed by ChargeUK, EVA England and the Renewable Energy Association, cited international precedents.
It highlighted how comparable programmes in Iceland and New Zealand resulted in EV sales plummeting by 75 per cent and 50 per cent respectively during 2024.
A Treasury spokesperson responded to Business Matters: “This Government is committed to the EV transition, boosting support to save drivers up to £3,750 on a new car and investing over £3 billion into UK manufacturing and more charging points.”
