The Budget drops the biggest anti-motorist bombshell in years – a full Pay-Per-Mile tax on electric and plug-in hybrid cars, plus luxury-tax hikes, Motability cuts and a fuel-duty freeze that expires in months
If you were hoping today’s Budget might go easy on motorists, then bless you for your optimism. Anyone paying attention knew this was coming, and yet it still feels like being slapped with a wet kipper. And just like that, buried beneath all the other headlines, comes the most consequential motoring announcement in years – one that will reshape the automotive landscape, hammer the car industry, and punish drivers across the country. The Government has now confirmed Pay-Per-Mile taxation for electric vehicles. Yes, it’s real. Yes, it’s happening. And no, it won’t stop at EVs.
Pay-Per-Mile: The Big One
Starting April 2028, the UK will introduce a mileage-based road duty:
- 3p per mile for battery-electric cars
- 1.5p per mile for plug-in hybrids
And just to add a sprinkle of confusion, this sits on top of VED, not instead of it. That means EVs – already losing their tax advantages – now face a per-mile charge that will hit anyone who drives more than a trip to Tesco once a week.
Do a typical 7,000–8,000 miles a year, and you’re staring at somewhere between £200–£300 extra annually for an EV, and a tidy £100–£150 for a PHEV.
Drivers thought they’d escaped this because “EVs don’t pay fuel duty.” The Treasury’s response? “Hold my calculator.”
The OBR: Cold Water, Straight From the Tap
Before you accuse me of being dramatic, the Government’s own forecasters are already ringing the alarm bell.
The Office for Budget Responsibility estimates that this tax will deter hundreds of thousands of people from switching to electric cars. Their number? 440,000 fewer EVs on UK roads by 2031. Nearly half a million lost sales.
Let’s not forget: manufacturers are already wrestling with the ZEV mandate, trying to hit Government-imposed EV sales percentages with a public that’s growing increasingly sceptical. And now they’ve been gifted yet another barrier. Lovely.
Luxury Car Tax: A Slight Reprieve… For Some
One of the few “nice” announcements – and I use that term loosely – is that the threshold for the Expensive Vehicle Supplement (the so-called luxury-car tax) will rise from £40,000 to £50,000 for EVs from April 2026.
That means electric cars under £50k won’t get clobbered with the extra £425 annual charge for the first five years. But seeing as nearly every half-decent EV now starts around £50k anyway, it’s more of a nudge than a rescue. Petrol and diesel drivers don’t benefit – their threshold stays stuck at £40k.
Fuel Duty: Frozen… But Only For a Moment
Yes, fuel duty has been frozen. Again. But only until September 2026 – a tiny breather before the inevitable rise kicks in. A temporary reprieve for ICE owners, but hardly a long-term comfort.
Motability Scheme Cut Back
Another change that didn’t get the headlines it arguably deserves: premium brands removed from the Motability scheme. BMW, Mercedes, Audi – all out.
The Government claims this “returns the scheme to its original purpose.” But for disabled drivers who value comfort, choice and dignity – and for dealers relying on fleet turnover – it’s a serious blow.
The Bigger Picture: A Full-Scale Squeeze on Drivers
Stack it all up:
- EVs hit with Pay-Per-Mile
- PHEVs dragged in too
- Luxury-tax changes limited in effect
- Fuel duty freeze expiring next year
- Motability options slashed
- Manufacturers staring down the barrel of the ZEV mandate
- OBR predicting a sharp decline in EV adoption
This isn’t just a motoring tweak. It’s a structural shift. For decades, driving has been a symbol of freedom. From 2028 onwards, every mile will literally cost you. Those spontaneous head-clearing drives? They come with a price tag now.
And all this, supposedly, to raise a mere £1.4bn a year – pocket change in Government terms, but potentially catastrophic for an already struggling car market.
Final Thought
The Chancellor says this Budget is about fairness and responsibility. For motorists, it feels more like a rug-pull. Pay-Per-Mile marks the end of the road as we knew it. The question now is simple: How much driving will the average person cut back once every journey becomes a bill?
I’ve got thoughts. You’ve got thoughts. Drop yours in the comments on the video – this conversation is only just beginning.
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Good evening Shahzad
Just quickly….
Many thanks for this – great analysis. I don’t have an electric car, but did think those of us with (frugal) diesels should have our tax and VAT burdens shared ! (I will watch tomorrow)
Your “AI” post yesterday looks mighty impressive….However, in truth, I am utterly frightened by the whole concept. I think in 5 years time the robots (as in drones) will be out to destroy us all, seriously. The boffins are crazy, intent on Dr Frankenstein’s monster for real, on a Global scale, 150 years after the book. If you can tell me your video is NOT scary….along those lines…I might be brave, sometime, and take a peek !
Apologies, I should have begun by saying ‘sorry’ I didn’t see you at Hampton Court concours of elegance, on the opening Friday.
But, since then, I also should have told you here, in typed words, that I did make contact with Faraz Latif and he told me all about his Aston DB6 in Karachi (Apols.) We have communicated a couple of times and he’s also in AMOC. Unfortunately on the day he last emailed to say was in England for a few days, I was actually in Austria on a big AMOC event (90 years celebration of the club) and so were the AMHT archivist and its podcast host, and several AMOC staff.
However, I hope I was able to help him in steering him towards visiting the Aston Martin ‘Heritage’ HQ in Newport Pagnell, the Gaydon factory, plus the AMHT/AMOC building just as they got back, and the day before his flight returning to Pakistan !
Best Regards
John
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Awesome – hope to catch up with you soon in person. The conversation with AI video is safe to watch. However your fears are not unfounded – I always say it’s going to go one of two ways for us with AI – VERY Bad or VERY good. It all depends on when AI breaks free from its shackles and starts thinking for itself, at that points we will see it decides to keep us around or not!
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Excellent analysis of the ‘automotive’ budget, as you were driving, Shahzad! I think only you and Chris Harris can talk lucidly, whilst on the move, and still concentrate.
“…is it cheaper to go to a therapist, or is it cheaper to go for a drive?” – Great forethought…and therapists will soon use that in their advertisements: “Why risk an accident out on the road, when we have comfy couches, plus we’ll give you a cup of tea and a discount!”
On the AI scenario, again, you are probably correct, though I don’t (personally) see much – in fact nothing really – to be VERY GOOD in our future, but certainly a possibility of VERY BAD.
Too many younger people (soon with powerful jobs) brought up on video games, intent on war, death and destruction. They will struggle to separate fact from fiction and adopt a ‘survival of the fittest’ mentality, only with the aid of technology, and blurring reality with AI ‘tools’ to dominate their fellow men and women. Not just in their work/business environments but even in social ‘one-upmanship’ scenarios.
Remember playground talk? “My dad’s car is better than your dad’s!” etc, etc. and that was simply because child ‘A’ could be driven to school in a Cortina 1300L, while child ‘B’ could arrive in a 1600GL and the gang leader, child ‘C’, would laugh at both and say, “Well, my dad’s got a 2000 Ghia…with a vinyl roof!” And still competitive human nature remains, 40 years on (as it has done for 4,000 years in the past)!
Anyway, I’ll remain positive for as long as I can, by ignoring Electrics and retaining nostalgia in watching thoroughbred Classic Cars, with great style, proper gearboxes, wood/leather interiors, and internal combustion engines (eg those we see at Hampton Ct, Villa d’Este, and many more at the Retromobile show in Paris!)
Best Regards
John
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I don’t agree with your posture on ‘pay per mile’ or motability.
Pay per mile is not going to limit anyone’s driving anymore than those of us who have to pay through our noses at filling stations. We don’t have the luxury of being able to fill up on a cheap rate at home. We consciously calculate the cost of driving all the time….whether to pop to the shops or save it for the weekly shop for example.
All drivers have to pay their way, EVs, PHEVs and as always, those of us without the cash to invest in the electric dream.
Motability. If someone has the funds to add to their benefits in order to upgrade to a luxury car, maybe they don’t need the benefits in the first place? They are stealing taxpayers money meant for genuine need.
Of course, the bar for ‘needing’ a brand new car due to a so-called ‘disability’ is low, as you can see in any supermarket carpark. I am constantly amazed at the nimbleness and speed at which these drivers exit their tax payer funded vehicles in order to buy their vapes or fags while I get to drive around for 5 minutes looking for a spot, then have to walk in the rain from the far side of the carpark to buy food that I need, whilst calculating the cost as I go.
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