What taxes apply to electric vehicles and when will new petrol and diesel cars be banned?

A new pay-per-mile fee for electric vehicles (EVs) and hybrid cars was announced in the Budget.

All new cars will have to be electric or hybrid from 2030, when a ban on the sale of new petrol and diesel cars comes into effect.

From April 2028, electric car drivers will have to pay a road charge of 3p per mile, while plug-in hybrid drivers will have to pay 1.5p per mile. Rates will increase every year with inflation.

The government had previously said it wanted “a fair system for all drivers”, pointing out that there is no equivalent fuel charge for petrol and diesel cars.

An electric car driver driving 8,500 miles per year can expect to pay around £255. This would be about half the cost per mile that petrol and diesel drivers pay in fuel tax.

The measure is expected to raise £1.1 billion in the financial year 2028–29, rising to £1.9 billion by 2030–31.

The tax will apply to all UK-registered EVs and hybrids, with mileage checked annually, usually during an MOT.

This fee will be added to the existing vehicle excise duty system. A consultation is underway to help launch the scheme.

Other changes have already been implemented.

Vehicle excise duty on EVs becomes payable for the first time on April 1, 2025.

For new cars, payments are £10 in the first year, rising to the standard rate of £195 in the second year. Those registered between April 2017 and March 2025 pay £195 from the start.

Electric cars registered on or after 1 April 2025 and costing more than £40,000 were subject to a “luxury car tax” of £425 per year. The price limit will increase to £50,000 in April 2026.

Drivers of electric vehicles in London will have to pay congestion charge from 2026.

The move is part of the UK government’s efforts to meet a legally binding target of achieving “net zero” by 2050. This means not emitting more greenhouse gases than is removed from the atmosphere.

Domestic transport – including cars, buses and trains – was responsible for more than a quarter of emissions in 2023, making it the largest emissions sector.

Ministers have committed to banning the sale of new petrol and diesel cars by 2030.

This means all new cars must be electric or hybrid – with both an internal combustion engine and an electric motor.

UK drivers will be able to buy a new hybrid by 2035.

The European Union will not ban the sale of new fossil fuel-powered cars until 2035.

Sales of new fully electric cars in the UK continue to grow.

Car industry trade association SMMT said the number registered is expected to rise from 29,800 in October 2024 to 36,800 in October 2025.

This figure was equivalent to a quarter of new car registrations. The target is to increase it to 80% by 2030.

In October, 73% of new electric cars were purchased for businesses or fleets, of which 27% were registered for private buyers.

Meanwhile, the second-hand market is growing, but from a low base. SMMT data shows that about 80,600 used electric cars were purchased between July and September. This accounts for 4% of second hand sales.

Analysis from electric charger mapper and data provider Zapmap shows there are now at least 1.7 million fully electric cars on UK roads, around 5 per cent of the total.

Combustion engine cars will still make up the majority of cars and people will still be able to drive them after 2035.

In July, the government launched the Electric Car Grant Scheme, offering grants of up to £3,750 for eligible models priced at £37,000 or less.

The scheme was launched with an initial funding of £650m. additional £1.3 billion Funding was announced in the budget.

Transport Secretary Heidi Alexander told BBC News that subsidizing EV sales would support economic growth.

“This is an investment in the future of the country and the good quality manufacturing jobs that come with it,” he said.

motoring organization The AA has said that drivers “often tell us that the upfront cost of new EVs is a barrier to switching to electric”.

For second-hand cars, online marketplace Autotrader says it is “seeing a number of examples where electric cars are priced the same or lower than similar petrol models, especially in the three to five-year age group”.

Additionally, around 680,800 electric cars are now being leased, the British Vehicle & Leasing Association (BVRLA) said. This is almost half of all leases.

When it comes to running costs, electric charging can be cheaper than petrol or diesel. But it depends on where you charge.

Charging at home – for those who have the option – is quite cheap, especially on off-peak tariffs.

Home charging is eligible for a 5% rate of VAT on home energy, compared to the standard rate of 20% for public charging.

Prices can vary greatly when using a public charge point, depending on factors including charger speed and time of day. Some apps offer discounted charging rates.

The fastest, “ultra-rapid” charging on public networks can be more expensive per mile than fossil fuels.

Motoring groups say electric cars are generally cheaper to maintain.

The range of electric cars has improved, as has the number of public charge points. But there are concerns about their availability across the country.

Zapmap’s data shows around 87,000 at around 44,000 locations across the UK. These include places such as supermarket car parks and lamppost chargers.

The Chancellor said the government would invest an additional £200m to accelerate the implementation of charge points.

In March, a report by the Public Accounts Committee of MPs said that availability on motorways was still “messy”.

It says the government is on track to reach the required minimum of 300,000 points by 2030. However, it adds that “very few have been installed outside the South East and London, which currently host 43% of all charge points”.

According to government data, more than 28,000 home charging sockets have been installed under the Electric Vehicle Chargepoint Grant scheme from April 2022.