UK Unveils Landmark Mileage Tax: EV and Hybrid Drivers Face Per-Mile Fees, State Pensioners Shielded

In a highly anticipated Budget move, UK Chancellor Rachel Reeves announced new mileage-based taxes to replace lost fuel duty revenue as the transition to electric vehicles accelerates. Starting April 2028, battery electric cars must pay 3 pence per mile, and plug-in hybrids 1.5 pence per mile—the first such policy aimed at balancing the fiscal impact of the green mobility shift. The Office for Budget Responsibility (OBR) estimates this will raise £1.4 billion annually by decade’s end. Rates will increase with inflation.

 

To ensure fairness, Reeves declared that people receiving only the basic or new state pension will not have to pay small amounts of income tax, easing the burden on retirees. All citizens are now asked to contribute fairly via new or existing levies.

 

Reeves also revealed a shake-up in the Motability scheme for disabled drivers. Luxury brands like BMW and Mercedes will be removed, with the scheme pivoting to British-built and affordable models. Charities warn that the change could increase costs for vulnerable groups, but Motability aims to focus subsidies on genuine mobility needs.

 

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Source: Independent, Bloomberg, BBC, GB News, Autocar, Carwow, RAC.​