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Treasury warned EV pay per mile charge could cost £4.8bn
Jacob Grattage,Reporter, Business & Accountancy Daily
5 May 2026

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Coalition of electric vehicle trade bodies write to minister asking for delay in Budget mileage charge, stating cost of rollout would exceed revenue raised

The 3p per mile charge for electric vehicles (EVs), included in the Autum 2025 Budget is set to start from April 2028.

From then, EV drivers will pay an electric vehicle excise duty (eVED) alongside their existing road tax, with the mileage charge payable each year, at 3p per mile and 1.5p for plug in hybrids.

Budget costings stated the charge will bring in £1.2bn in its first year, £1.6bn in 2029-30, eventually reaching £2.1bn in 2030-31.

However, rolling out eVED in 2028 could cost the economy up to £4.8bn, according to research from BEAMA, the energy infrastructure trade association.

In a letter to Treasury minister Dan Tomlinson, Matt Adams, head of electrical transport at BEAMA stated: ‘This cost would exceed the total revenue the new tax policy is forecast to raise by 2031’.

The forecast is based on research by BEAMA which shows that if EV sales collapse at a similar rate to when other countries introduced a comparable tax, and sales aren’t replaced by petrol or diesel cars, the Treasury could lose £4.8bn in 2028.

In the letter, signed by three other trade bodies, Adams stated the eVED charge ‘is already causing a significant decline in driver sentiment towards EVs and a decline in drivers who would get an EV as their next car’.

Quoting research from fellow signatory, EVA England, the letter stated: ‘Research shows that 70% of drivers are concerned with paying upfront and almost 30% fewer drivers would be very likely to recommend an EV to a friend or family after eVED’.

The letter referred to the falling number of EV sales after similar charges were introduced in other countries.

Stating in New Zealand ‘EV sales fell from 10% to 4% within months and have not recovered’ due to ‘road user charges’, and a similar ‘kilometer-based fee’ in Iceland ‘resulted in a 75% decline in new EV sales in 2024’.

Citing this, Adams said: ‘The Treasury stands to lose around half of its projected revenue from eVED in year one and year two, if EV sales do collapse at a similar rate to New Zealand (50% decline) and are instead replaced with internal combustion engine vehicle sales.

‘New internal combustion vehicles are around £6,000 less than the average cost of a new EV, so we estimate around £630m less VAT revenue from the sale of internal combustion vehicles vs the EV equivalent’.

Adams continued: ‘This VAT revenue loss could rise in year two. This is in addition to the £260m a year cost to leasing companies, meaning eVED could cost the economy a minimum of £890m a year in the first two years alone. This is almost all the projected revenue eVED is due to raise in 2028-29’.

‘A delay to 2030 would provide essential stability at a critical point in the EV transition. Manufacturers in the EV supply chain need a clear message from government to continue investment into local communities and the wider economy’, Adams finished.

The Treasury has been approached for comment.