U.K. Government considers electric vehicle tax

Britain’s government is considering to introduce a new tax on electric vehicles, it announced on Thursday (November 7, 2025) ahead of a difficult Budget due later this month.

The plan would bring EVs more in line with petrol and diesel cars, which critics say could discourage drivers from switching away from combustion engines.

“Fuel duty covers petrol and diesel, but there’s no equivalent for electric vehicles,” said a government spokesperson. “We want a fairer system for all drivers.”

“British Finance Minister Rachel Reeves will announce a policy to introduce a three pence ($0.04) per mile (1.6 km) tax for EVs in her November 26 Budget,” the Daily Telegraph reported.

“The scheme would be implemented in 2028 following a consultation, and would cost EV drivers £250 a year on average,” according to the newspaper. “The levy would generate £1.8 billion annually by the early 2030s,” the Telegraph added.

SMMT, the trade association for the British motor industry, said “introducing such a complex, costly regime that targets the very vehicles manufacturers are challenged to sell would be a strategic mistake”.

It could have the effect of “deterring consumers and further undermining industry’s ability to meet ZEV (zero emission vehicle) mandate targets,” it said, adding that about one in four vehicles sold in the U.K. is fully electric.

Countries such as Iceland and New Zealand have already implemented a mileage charge for electric vehicles.

The Office for Budget Responsibility, the U.K.’s public finance watchdog, estimates that fuel taxes will bring in £24.4 billion in 2025/2026, representing two per cent of government revenue. Currently, revenue from fuel duty would reduce over time as more drivers switch to EVs.

Ms. Reeves — who has already significantly increased taxes this year, particularly on businesses, while cutting spending — is under pressure to balance the public accounts without stifling faltering growth.

This week she refused to rule out increasing major taxes such as income tax or VAT, two levies that her Labour party had pledged not to raise before winning last year’s general election.