Electric Cars and the proposed 3ppm charge in 2028: What every driver should know

Announced at the Autumn Budget and coming in 2028 for all new and existing electric vehicle drivers.

The government’s Autumn Budget confirmed that from April 2028, electric cars will be subject to a 3p-per-mile charge, with plug-in hybrids set at 1.5p per mile. At launch electric vans and commercial vehicles will not pay this new mileage tax.

The response has been loud but the need for change is simple enough - as EV adoption grows there are naturally few petrol and diesel cars on the road which is resulting in a fall in fuel duty receipts. As with any revenue stream - if it reduces it needs to be replaced with something else to maintain the status quo. 

The Treasury therefore needs a long-term replacement and given that versions of road pricing have been discussed in the UK for almost tweny years this isn't an overnight idea - it just so happens to be the first time it has actually been given a firm start date. 

The charge will cover all mileage - even those completed abroad where people are already paying the road tolls in the respective country. 

So the moment the Chancellor announced it, the questions began.

How will the mileage actually be measured?

This is the area generating the most heat and the least clarity becuase at this stage they simply don't know.

The government’s consultation suggests a system where drivers declare mileage upfront, and it is later checked via a verified odometer reading. For most vehicles, that would mean the MOT.

But newer cars don’t have an MOT for three years, so unresolved questions include:

• How will mileage be verified for brand-new vehicles in their first two years?
• How are miles split between owners if a car is sold mid-year?
• What happens with leased vehicles, where the driver and keeper are different?
• Who pays for company cars with mixed business/private mileage?
• How will the government ensure collection costs don’t outweigh revenue?

None of these answers are settled. The consultation is ongoing and the policy may evolve significantly.

At this stage also the government have ruled out telematics but muted suggestions have been made about plugging into manufacturers software that is now in every car - principle seems fine until you realise that data from vehicles isn't in the same format and there is currently a cost from manufacturers to access this data [our soon to be launched fleet management tool will be fed by this data source ] and also whether manufacturers would be comfortable with the British Government having access to this data. 

It is also not clear whether this could work for earlier electric vehicles which don't have the same connectivity. 

Does 3p per mile wipe out the EV running-cost advantage?

The cost of "fuel" has always been an attractive benefit for electric vehicles - one of many of course - but does this additional wipe out at least one of these benefits? 

We've picked two similar cars - a fuel efficient hatchback and similar sized electric car

• Example 1: Petrol – VW Golf 1.5 TSI R-Line
  • Official combined: 49.6 mpg
  • Petrol: £1.29/litre
  • Approx fuel cost:  c.11.8p per mile
  • At 10,000 miles/year =  £1,180 per year
• Example 2: Electric – VW ID.3 150kW Match Pro S 79kWh
  • Real-world efficiency: 0.266 kWh/mile
  • 66% home charging @ 9p/kWh
  • 34% public charging @ 79p/kWh
  • Weighted average electricity cost = 32.8p/kWh
  • Energy cost = 8.7p per mile
  • At 10,000 miles/year =  c.£870 per year

Cost advantage for EV - c£310

If we then add the proposed 3p per mile mileage tax:

• EV effective cost = 11.7p per mile
• Revised cost = £1,170 per year

Conclusion:
Even with 3p/mile, the ID.3 still edges the Golf on running cost with a few caveats - most EV current EV drivers undertake a larger proportion of home charging and 10000 miles per annum is deemed to be above the average mileage currently for electric car users. 

Of course fuel is only one of the cost considerations or advantages when considering and choosing an electric vehicle - if you are a company car driver or using salary sacrifice, you’re already paying dramatically less overall compared with an equivalent petrol car thanks to low BIK and these savings alone dwarf the impact of a £25-per-month mileage charge.

The expensive car supplement is also changing. 

Having only been introduced in April 2025 for electric cars the government also announced in the budget that it would increase the Expensive Car Supplement  threshold to £50,000 - remembering that it is the retail price and not the price paid for the vehicle that triggers the charge.

• From April 2026, the £40k threshold becomes £50k for zero-emission cars
• This removes roughly £425 a year of VED costs
• For many drivers, this saving will more than offset a future mileage charge — especially at 10,000 miles or below

At this stage there is no suggestion that cars between £40-£50k that had the charge applied this year will retrospectively benefit. 

• When calculating and negotiating contract hire offers manufacturers and funders will be looking to acheive an attractive price point - in doing so they will naturally consider whether the expensive car supplement applies or not - where it does in the marginal areas around the threshold manufacturers will often increase support terms to negate the cost - so the hirer effective doesn't get penalised. 
• PCP and purchase customers considering a car with a retail value between £40k-£50k may want to consider holding off registration until April to benefit from the "savings" - unless of course the manufacturer or dealer is compensating for an earlier registration. 

What does this mean if you’re considering your first EV?

If you’re thinking about your first EV and the 3ppm announcement has given you reason to stop and pause, you’re not alone - such policy headlines often create more anxiety than the policy itself.

Firstly it is worth reminding yourself what is driving you to consider an electric car - is it the environmental benefits and contributing to cleaner air or the cost advantages through charging, taxation and potentially how you "buy" the vehicle.

Chances are it's a combination of both and what really matters is how you drive, particularly your annual mileage and your access to home charging. For most new drivers the mileage charge plays a small role in the total ownership picture, and it’s worth evaluating the numbers in full rather than the headlines in isolation. 

It is worth noting also at the same time of announcing the ppm for electric vehicle the CAP on fuel duty was also removed - paving the way for expected rises in duty on petrol and diesel vehicles [ including hybrid and plug-in ] in the future. 

Should this change how you feel about EVs?

 If you already drive an EV what were the reasons for adoption initially? 

•  Lower running costs - including fuel? 
•  Lower BIK
•  Zero tailpipe emissions

 Compared to petrol... diesel ... hybrid and plug-in vehicles those reasons still stand   and whilst the new mileage charge narrows the gap, it is only slightly and if fuel      duty rises it may remain the same. 

 The charge is over two years away and much it to be decided - some might say it   would have been prudent to have delivered a more mature and detailed proposal in   say a years time ut we can only deal with what we know now - and make our   decisions accordingly. 

•  The rate may change - both before launch and once in place
•  The mechanism of data collection may change 
•  The policy may be refined if collection becomes too complex or costly to administer

In reality, for anyone taking an EV on a three-year contract today, the 3p-per-mile charge may only affect the final year, if it comes in as planned at all. 

Any potential alternatives? 

We feel the pence per mile charge is rather basic and having previously changed vehicle taxation to encourage improved efficiency we think the same should apply to electric vehicles. 

Heavier cars with higher fuel consumption contribute more to the revenue than smaller more efficient cars - both in terms of the first year VED and also the amount of fuel they use [ the more fuel the more duty is paid ] 

It would't be difficult to apply similar logic to electric vehicles - so more efficient vehicles [ vehicles are already tested for kWh/100km which can be easily converted to miles/ kwh for ease of consumer understanding ] would be have a lower annual VED charge than less efficient vehicles. 

This would encourage manufacturers to produce more efficient cars that consume less energy in re-charging - of course there is the inherent risk of a repeat of diesel gate! 

This solution isn't perfect because it would penalise older electric vehicles that by nature are less efficient - but maybe those vehicles are simply left as they are to promote a healthy uptake of used EV's and the new vehicles pave the way for increased revenues to replace fuel duty. 

Perspective matters

A new cost always feels big when it’s fresh. But put plainly:

For most drivers, 3p per mile in 2028 is a small part of a much bigger picture, it shouldn’t and most likely won't be the deciding factor in whether an EV works for you or yopur business. 

Running costs, charging access, tax position, vehicle choice and usage pattern all matter more.

Why NEV Leasing takes a broader view

Situations like this highlight why NEV Leasing doesn’t just “supply electric cars”.

Transition takes time and everyone’s journey is different.  Sometimes the right vehicle right now is petrol, hybrid, plug-in hybrid or electric - we're here to provide the unbiased facts and the impartial insights of 30 years of industry experience and over 10 years of owning and operating plug-in and electric vehicles. 

We give you the insight, context and confidence to choose what’s right for you right now and plan for the future. 

If you'd to see what this means for your next vehicle choice, your fleet, or your salary sacrifice scheme, we’re here to help - call us on 01206 585837 or click here to arrange a call at a time convenient for you.