Labour's new pay-per-mile road tax to clobber businesses, ministers admit

Published: 17:09, 14 July 2026 | Updated: 17:10, 14 July 2026 Labour's new pay-per-mile road tax on fully electric and hybrid vehicles will clobber businesses, ministers have admitted. An internal Government impact assessment acknowledges the levy, part of the effort to reach Net Zero, will affect around 5.6million vehicles and that ‘the impact will be material’ on some firms. While it does not give a figure for the potential impact, it is yet another blow to businesses following Chancellor Rachel Reeves's Employer National Insurance hike, inflation-busting increases in the minimum wage and amid sky-high energy costs and changes to employment law already expected to cost businesses £5billion. Critics warned the new levy, known as eVED, threatens to further push up prices for consumers as firms will look to pass on any increase in costs. Ministers said yesterday they would push ahead with proposals to charge electric vehicle owners 3p a mile to ensure they make a ‘fair contribution’ to road upkeep costs. Plug-in hybrid drivers will also be charged 1.5p per mile. The new tax will be introduced from April 2028, with a typical electric vehicle driver expected to pay about £240 per year. The charge is on top of road tax, which is around £200 for most vehicles but £600 a year for the first five years for cars with a price tag of £40,000 or more - which includes many electric and hybrid models. Howard Cox, founder of the FairFuelUK campaign, said: ‘Labour’s new pay-per-mile road tax on electric and hybrid vehicles is yet another hammer blow to British businesses, ministers have now been forced to admit. ‘Once again, it is businesses and ultimately consumers who will pay the price for Labour’s tax-raising agenda. This stealth tax on greener vehicles shows this government has no understanding of the pressures facing companies trying to stay competitive.’ Ministers claim the raid is necessary to plug a projected drop in fuel duty revenues as petrol and diesel are phased out, with new sales of petrol and diesel cars set to be banned from 2030. At present, fuel duty raises more than £25billion a year. But the internal impact assessment which emerged today says businesses who have invested in fleets of EVs and hybrids, after being encouraged to by ministers, will be clobbered particularly hard. It states: ‘For some businesses, particularly large fleets, the impact will be material. ‘One-off costs for businesses are expected to include updating processes to estimate mileage for their vehicles and pay eVED. ‘We also expect there will be ongoing costs for businesses including putting in place new systems to estimate and pay eVED.’ Rachel Reeves, the Chancellor, announced the pay per mile tax in the Budget last November. The Treasury was contacted for comment.