Will I have to pay road tax on an electric car in 2025?

Yes, from 1 April 2025, electric vehicles will no longer be exempt from Vehicle Excise Duty (VED). New EVs will pay a £10 first-year rate, followed by the standard rate which is currently £190 per year. Vehicles with a list price over £40,000 will also attract the £425 Expensive Car Supplement for five years.

How is mileage tracked for the 2028 pay-per-mile tax?

The government proposes using odometer readings provided by drivers during the annual VED renewal process. These readings will be cross-referenced with MOT data and service records to ensure accuracy. The system does not currently require the installation of GPS tracking devices in vehicles.

Does pay-per-mile tax apply to existing lease agreements?

If your lease agreement spans into April 2028, you will be liable for the new charges from that date. Most modern leasing contracts include clauses that allow the provider to pass on changes in government taxation or VED rates to the customer.

Is an EV still cheaper than a petrol car after 2028?

Generally, yes. At 3p per mile, the eVED rate is roughly half the cost of current fuel duty for petrol and diesel vehicles, which averages 6p per mile. When combined with lower maintenance and charging costs, EVs typically maintain a lower total cost of ownership compared to internal combustion engine alternatives.

How Does the 2028 EV Pay-Per-Mile Tax Impact Car Leasing?

What is Electric Vehicle Excise Duty (eVED)?

Electric Vehicle Excise Duty (eVED) is a mileage-based taxation system for zero-emission and plug-in hybrid vehicles scheduled to begin in April 2028. This tax is designed to replace lost fuel duty revenue as the UK transitions away from internal combustion engines. According to the UK Government, the standard rate for fully electric cars (BEVs) will be 3 pence per mile, while plug-in hybrids (PHEVs) will be charged 1.5 pence per mile.

Cost per mile for fully electric cars (BEVs)

1.5p

Cost per mile for plug-in hybrids (PHEVs)

£260m

Estimated annual fleet compliance costs by 2028

How the 2028 Pay-Per-Mile Tax Affects Leasing Contracts

The introduction of eVED creates a specific operational challenge for car leasing because the leasing company is typically the registered keeper of the vehicle. Under the proposed rules, the registered keeper is legally liable for the payment and administration of the tax. In practice, that for any 36 or 48-month lease starting after April 2024, the contract will overlap with the 2028 tax implementation date.

Step-by-step leasing guide

Leasing providers must now determine how to reconcile these mileage-based costs with customers. Current predictions suggest that leasing companies will need to collect odometer readings annually and adjust monthly payments or issue balancing invoices based on actual usage. This shift moves leasing from a fixed-cost model toward one with variable monthly overheads linked directly to road usage.

Comparison of Electric Vehicle Taxation Stages

Evolution of UK EV taxation through 2028 implementation.
Tax Component	Pre-April 2025	April 2025 - March 2028	From April 2028 (eVED)
Standard VED Rate	£0	£190 - £200 (est.)	Standard VED + Mileage Rate
Mileage Charge (BEV)	N/A	N/A	3p per mile
Mileage Charge (PHEV)	N/A	N/A	1.5p per mile
Expensive Car Surcharge	Exempt	£425 (over £40k value)	Applicable

Who is Responsible for Paying eVED on a Lease?

Responsibility for paying eVED rests with the registered keeper, which in most Personal Contract Hire (PCH) and Business Contract Hire (BCH) agreements is the finance house or leasing company. While the leasing company pays the DVLA directly, these costs will be passed to the driver through the lease agreement. The British Vehicle Rental and Leasing Association (BVRLA) has highlighted that this creates a significant administrative burden, estimating £75 million in direct annual administration costs for the fleet sector.

Registered Keeper Liability
The leasing company remains the legal entity responsible for eVED payments to the DVLA.
Contractual Pass-Through
Drivers will likely see eVED costs added to their monthly rentals or billed as a separate end-of-year reconciliation.
Mileage Verification
Odometer readings from annual MOTs or service records will be used to verify driver-reported mileage.

Benefit-in-Kind (BiK) rates

Our Take

For businesses choosing a company car, the 2028 transition makes accurate mileage forecasting critical. We observe that while Benefit-in-Kind (BiK) rates remain low, the total cost of ownership (TCO) for high-mileage EV fleets will increase by approximately £300 for every 10,000 miles driven once eVED is active.