Key facts:

• The government has announced a 3p-per-mile road tax for EVs in the Budget of 26 November 2025, with roll-out planned for April 2028.
• This will be added to the £195 annual Vehicle Excise Duty, costing the average EV driver around £270 per year for 9,000 miles.
• EVs remain cheaper than petrol or diesel cars for most people thanks to reduced running costs, less maintenance, and savings from salary sacrifice and ULEZ.

Published on 26 November 2025 by:

James Garlick

Head of EV, Hive

The UK government has just announced a new tax for EV drivers, based on how many miles they drive. So it’s no surprise that people are wondering what this will mean for the future of electric cars. Let’s break down what’s being introduced, why it’s come up now, and how it compares to the tax already paid by petrol and diesel drivers.

Shop EV chargers

Why is the government introducing a pay-per-mile EV car tax?

Petrol and diesel drivers already pay a tax based on how far they drive, known as fuel duty. You don’t see it itemised, but it’s included in the price at the pump, with the typical petrol driver paying around £548 a year¹ in fuel duty. And of course, the more you fill up, the more tax you pay – so in practice, it’s already a pay-per-mile system.

EV drivers don’t currently pay anything comparable. Because electric cars don’t use fuel, they avoid fuel duty altogether, which creates a challenge for the Treasury. Fuel duty raises around £24.4 billion² each year, and that figure will naturally drop as more drivers choose electric.

With about 1.4 million³ EVs already on UK roads and millions more expected by the end of the decade, the government now needs a long-term way to fund the UK’s road network.

How much will the new EV road tax cost?

The new tax is 3p per mile for EVs. For an average driver covering around 9,000 miles a year, that works out to roughly £270 annually. It’s an extra cost, but still noticeably lower than what most petrol and diesel drivers pay today.

Standard petrol and diesel taxes are currently 52.95p per litre. Add in the 20% VAT at the pump, and the difference becomes even clearer.

We’ve crunched the numbers to compare the approximate cost of driving 9,000 miles in a petrol car vs an EV. We’ve also shown the impact on the overall cost of different tariff rates (pence per kilowatt hour).⁴

• Medium-sized petrol car (1.4 to 2 litre engine): £1,260⁵
• EV with home charger on a Standard Variable electricity tariff⁶: £719
• EV with home charger using the British Gas EV tariff’s off-peak charging: £245
• EV with Hive-compatible home charger on the British Gas EV tariff, using Hive’s exclusive Power+ smart-charging service: £185⁷

So even with a per-mile charge of up to £270, EVs remain the cheaper option for most households. Charging at home can be up to six times cheaper than running a petrol car, if you have a specialist EV tariff plus a smart-charging service like those offered by British Gas and Hive.

Will the new tax make EV driving less financially attractive in the UK?

As our calculations show, it will still be considerably cheaper to run an EV than a petrol car when the new tax of around £270 is added. And that’s just for someone on a basic Standard Variable tariff, without any of the big extra savings you can get with a specialist EV tariff and a smart-charging service.

How will the new VED+ EV road tax work?

The new system will be called VED+ and it’s designed to be straightforward. Here’s what’s being discussed so far:

• You estimate your annual mileage at the start of the year
• You pay for those miles alongside your standard £195 VED (Vehicle Exercise Duty)
• If you drive less than expected, the leftover balance carries into the following year
• If you drive more, you simply pay a top-up

If you already own an electric car, the change doesn’t remove the main benefits you’re used to. Charging at home is still far cheaper than filling up at the petrol station – especially if you have an EV tariff – and EVs also continue to enjoy lower maintenance costs thanks to fewer moving parts.

For anyone considering an EV for the first time, the new tax doesn’t take away the financial advantages. Instead, it simply narrows the gap slightly while keeping electric driving noticeably cheaper than traditional engines in most situations.

How does the EV road tax compare to petrol and diesel?

Even with a charge of 3p per mile, electric driving remains the most affordable option for many people.

EVs:

Currently pay no mileage-based tax, but will pay 3p per mile from April 2028

Petrol:

Already pay around 7p per mile in taxes through fuel duty and VAT, but this will increase when the temporary 5p fuel duty cut is removed in 2026

Diesel:

Pay around 6p per mile in taxes through fuel duty and VAT, although this too will increase when the fuel duty cut is lifted in 2026

So while EV drivers will start contributing through a mileage-based tax, petrol and diesel drivers will continue to pay considerably more.

Do electric vehicles offer additional advantages?

Beyond the savings from lower running costs, electric vehicle drivers do enjoy a few extra benefits:

Fuel savings

EV drivers can typically save around £700 a year compared to petrol or diesel vehicles. Charging at home using specialist EV tariffs and smart-charging services, such as the British Gas EV tariff and Hive’s Power+ service, can reduce home charging costs to as little as 2p per mile⁸, compared with up to 21p per mile for petrol. That makes a significant cost-saving difference over a year of driving.

Lower maintenance costs

With fewer moving parts and simpler drivetrains, EV maintenance costs are up to 40% lower than for petrol or diesel cars. Less oil, fewer filters and no exhaust issues mean fewer trips to the garage — and less spent when you do go.

ULEZ exemption

EVs currently have free access to Ultra Low Emission Zones (ULEZ) until December 2025. Preferential treatment is also expected to continue, giving EV drivers added savings and convenience in city areas.

Check out available EV grants too

Minimise your EV running costs with Hive

The easiest way to keep your EV costs low is to charge at home with a smart EV charger and pair it with a British Gas EV tariff. A smart charger lets you power up overnight when electricity is cheapest, while the EV-focused tariff provides low off-peak rates designed for home charging. Together, they make running an EV even more affordable – keeping your cost per mile well below petrol or diesel, even with the new VED+ charge.

What are the simplest ways to reduce the running costs of an EV?

Firstly, use an EV tariff with cheap overnight charging. That will bring the costs down a lot. Then add a smart-charging service that discounts the tariff rate even further. Sometimes these are incorporated into the tariff itself, but others like Hive’s Power+ act as a bolt-on that can be activated alongside the tariff. Added together, the savings from the EV tariff and the smart charging can be significant.

Discover EV charging

1. Assuming an average engine efficiency of 39.5 mpg and an average fuel price of £1.39 per litre. To drive 9,000 miles, you’d need 1,035 litres of petrol – with fuel duty charged at 52.95p per litre.

2. https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/fuel-duties/

3. https://www.rac.co.uk/drive/electric-cars/choosing/road-to-electric/

4. For calculations, we’ve assumed an EV travelling 3.3 miles per kilowatt hour, with electricity rates based on an average customer using Ofgem Typical Domestic Consumption Values paying by Direct Debit.

5. HMRC fuel advisory rates based on cost of petrol/diesel: 14p per mile for medium petrol car https://www.gov.uk/guidance/advisory-fuel-rates Prices for British Gas EV tariff as of Nov 2025 - 9p/kWh overnight

6. Based on Price Cap, 1^st October 2025 – 31^st December 2025.

7. Power+ is only available for customers with a compatible EV charger and a British Gas electricity tariff with a smart meter in credit mode. Based on our assumed efficiency conversion of 3.3 miles/kwh, savings assume that you are on the British Gas EV Power Nov26 tariff (as of 06/11/2025) and all charging is in Power+ mode in your off-peak period. If on a Time of Use tariff, we will only charge your EV during the off-peak window while in the Power+ schedule mode. For full details please see Power+ Terms & Conditions.

8. Travelling 9,000 miles using British Gas EV tariff and Power+ at 6.75p/kWh costs £185 (assumes vehicle efficiency of 3.3 miles per kWh). 9,000 miles at £185 = 2p per mile.