Electric vehicle (EV) owners are set to see a new ‘pay-per-mile' tax introduced in the upcoming Budget to combat a fall in fuel duty revenue, according to The Telegraph.

With the upcoming plans set to be announced on 26 November by Chancellor Rachel Reeves, those driving EVs will see an additional road tax of 3p per mile driven from 2028, when the charge is expected to be implemented following a consultation period.

For the average driver, this would see them incur a further £250 a year in tax, The Telegraph reports.

This is expected to be framed by ministers as an attempt to improve fairness, as those who drive petrol vehicles currently pay an average of £600 a year in fuel duty, and add that this will be based on an estimated average rather than on electronically monitored data.

However, the introduction of this tax could open the door for ‘wholesale adoption' of pay-per-mile taxation for all vehicles, The Telegraph argues.

Implementation

The plan for this scheme, which is being referred to as ‘VED+', is to align it with the annual payment of vehicle excise duty (VED) that has been paid by EV drivers since April of this year, as well as all other drivers, although there are no specific plans yet, The Telegraph states.

To calculate how much they must pay, EV drivers will be expected to estimate the number of miles they will drive in the year and pay a fee pre-emptively.

If the actual miles driven fall short of the estimate, some of the remaining money paid can then be carried over to the next year, with drivers who overshoot their estimate having to top up their payment if needed.

This charge will also be implemented for those who drive hybrid cars, although this will be set at a lower rate than for EVs.

By introducing this charge, Ms Reeves is sticking to the warning she made in a recent speech that ‘all will have to contribute' to help repair Britain's finances.

The Government is also reportedly working on a wider package of measures to support the EV sector, continuing its work and the work of previous governments in offering both discounts and other incentives (such as exemption from ULEZ charges) to encourage people to buy EVs to tackle the climate issue.

However, the decrease in petrol usage has meant that, by 2040, there will have been roughly £12bn lost in tax revenue according to Treasury estimates.

Enforcement

As it already oversees the collection of VED – via cameras that scan number plates and with employees on patrol – the Driver and Vehicle Licensing Agency (DVLA) will be tasked with also handling the new tax.