Chancellor's tax on EVs 'could create hole in Treasury's finances'

06 May 2026

Experts have warned Chancellor Rachel Reeves that her pay-per-mile electric vehicle (EV) tax could create a £4.8 billion hole in the Treasury's finances.

A coalition of industry trade bodies warned the Chancellor that there could also be adverse consequences for SMEs that work in the UK's clean transport sector.

In a letter to Exchequer Secretary Dan Tomlinson, the trade bodies stated that the new EV excise duty could affect new car sales and impact the Treasury.

The new duty, which is set to take effect from 1 April 2028, will charge drivers of electric cars 3p per mile and owners of plug-in hybrid cars 1.5p per mile. The Chancellor anticipates that the new tax will generate £1.1 billion in 2028/29, increasing to £1.9 billion in 2030/31. 

Jarrod Birch, Head of Policy at trade association ChargeUK, commented: 'EVs are experiencing a surge of interest as an alternative to roller-coaster petrol prices. The government should be doubling down on the transition by making buying and charging an EV affordable for all.'