eVED: Reforming motoring taxation

BUDGET 2025: Treasury minister Dan Tomlinson sets out the case for electric Vehicle Excise Duty

For too long previous governments have ducked the choices needed to reform our taxation system for the long-term. Not at this Budget. As well as delivering on the British people’s priorities: cutting NHS waiting lists, cutting the cost of living and cutting debt, this Budget is also announcing much needed tax reforms. Where unfairness is growing and the long-term health of the public finances depends on decisive action, this government is taking the right decisions for the long-term.

One of the clearest examples of overdue reform is motoring taxation. Today, drivers of petrol and diesel vehicles pay tax on how much they drive through fuel duty at the pump, while drivers of electric vehicles currently make no equivalent contribution.

If we do nothing, then by 2030 around one in five car drivers are expected to pay no fuel duty at all, while other motorists will continue to contribute an average of £480 a year. Given all cars cause congestion and wear and tear on the roads, this is not a fair outcome.

That’s why the government will introduce electric Vehicle Excise Duty (eVED) from April 2028. It will be set at half of the equivalent rate of fuel duty for electric cars, and half again for plug-in hybrid cars. eVED will ensure all car drivers contribute, but will still maintain important incentives to switch to an electric vehicle. eVED will not require ‘trackers’ in cars, nor will the government ask people to interact with a whole new tax system: car drivers will pay for the miles they drive alongside paying their usual road tax (VED). We are consulting on the details of this scheme here, and we would like to hear from you.

The transition to electric cars will improve our air quality, create high-skilled jobs and support our net zero goals. eVED will ensure this happens fairly and will also protect vital motoring taxation revenues for the long term. Fuel duty revenues are expected to fall to around half – to around £12bn per year in the 2030s. This is equivalent to funding nearly 70% of GP appointments that have taken place in England in the last year. Doing nothing about this would be fiscally irresponsible.

The government remains firmly committed to supporting the transition to electric vehicles. At Budget 2025, we have announced measures worth £3.6bn which will make electric cars and chargepoints more accessible and back our British automotive sector to build the electric vehicle models of the future here in Britain.
The government will continue to take steps to ensure the transition to electric is successful, fair and fiscally sustainable. Through this consultation and wider engagement, the government wants to hear your views on eVED and how best to implement it.

Dan Tomlinson is exchequer secretary to the Treasury 

The consultation runs until 18 March 2026. It is hosted on an online survey platform called SmartSurvey.

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