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

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

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

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

The government had previously said it wanted a “fairer system for all drivers”, noting there was no equivalent to fuel tax for petrol and diesel vehicles.

An electric car driver who travels 8,500 miles a year is expected to pay around £255. That would be about half the cost per mile that gasoline and diesel drivers pay in fuel taxes.

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

The tax will apply to all electric and hybrid vehicles registered in the UK, and mileage will be checked annually, usually during an MOT.

The charge will be added to the existing Vehicle Excise Duty system. A consultation is underway to help introduce the plan.

Other changes have already been implemented.

On April 1, 2025, vehicle excise tax became payable on electric vehicles for the first time.

For new cars, the payment in the first year is £10, 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 April 1, 2025 and costing more than £40,000 were subject to the “luxury car tax” of £425 a year. In April 2026, the price threshold will increase to £50,000.

In London, electric vehicle drivers will have to pay the 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. That means emitting no more greenhouse gases than are 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 emitting sector.

Ministers have pledged to ban the sale of new petrol and diesel cars by 2030.

That means that all new cars will have to be electric or hybrid, with an internal combustion engine and an electric motor.

UK drivers will be able to buy new hybrids until 2035.

The EU will not ban sales of new cars that run on fossil fuels until 2035.

UK sales of new all-electric cars have been growing steadily.

The number of registered vehicles increased from 29,800 in October 2024 to 36,800 in October 2025, the automotive industry association SMMT said.

The figure was equivalent to a quarter of new car registrations. The goal is to increase this figure to 80% by 2030.

In October, 73% of new electric cars were purchased by companies or fleets, and 27% were registered by private buyers.

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

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

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

In July, the government introduced the electric vehicle grant scheme, with grants of up to £3,750 for eligible models priced at £37,000 or less.

The scheme was launched with an initial fund of £650 million. An additional £1.3bn funding was announced in the Budget.

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

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

automotive organization The AA has said drivers “frequently tell us that the upfront costs of new electric vehicles are a barrier to making the switch to electric”.

For second-hand cars, online marketplace Autotrader says it is “seeing many examples where electric cars are priced the same or less than similar gasoline models, specifically in the three to five-year-old age group.”

Additionally, around 680,800 electric cars are currently rented, according to the British Vehicle and Leasing Association (BVRLA). That’s almost half of all leases.

In terms of running costs, electric charging can be cheaper than gasoline or diesel. But it depends on where you charge.

Charging at home – for those who have the option – is significantly cheaper, especially at off-peak rates.

Home charging applies at the 5% VAT rate on domestic energy, compared to the standard 20% rate for public charging.

Prices can vary greatly when using public charging points, depending on factors such as charger speed and time of day. Certain apps offer discounted charging rates.

Faster and “ultra-fast” charging on the public grid can be even more expensive per kilometer than fossil fuels.

Auto groups say electric cars are generally cheaper to maintain.

The range of electric cars has improved, as has the number of public charging points. But concerns remain about whether there are enough of them across the country.

Zapmap data shows almost 87,000 across the UK, in approximately 44,000 locations. These include places such as supermarket parking lots and streetlight chargers.

The chancellor said the government would invest a further £200m to accelerate the roll-out of charging points.

In March, a report from MPs’ Public Accounts Committee said availability on motorways was still “patchy”.

He said the government was on track to reach the minimum 300,000 points needed by 2030. However, he added that “very few have been installed outside of the South East and London, which are currently home to 43% of all charge points.”

According to Government data, since April 2022, more than 28,000 home charging plugs have been installed within the framework of the subsidy program for electric vehicle charging points.