HOW IT WILL WORK: Fully electric and hybrid vehicle mileage eVED tax looks set to impact taxi drivers’ running costs significantly

The Government has confirmed that a new mileage-based Electric Vehicle Excise Duty (eVED) will come into force on 1 April 2028, marking a major change in how owners of electric, plug-in hybrid and hydrogen-powered cars contribute towards the upkeep of Britain’s roads.

While the policy is aimed at replacing declining fuel duty revenues as motorists switch away from petrol and diesel vehicles, it is likely to have a particularly noticeable financial impact on taxi and private hire drivers, many of whom cover three or four times the annual mileage of the average motorist.

Under the proposals, battery electric vehicles and hydrogen-powered cars will pay 3 pence for every mile driven, while plug-in hybrid vehicles will be charged at 1.5 pence per mile. The rates will be increased in line with inflation from 2029 onwards to maintain their value in real terms, meaning the annual cost will gradually rise over time.

For the average private motorist, the additional expense may be relatively modest because of lower annual mileage. The picture looks very different for professional drivers. A full-time taxi or private hire driver travelling around 25,000 miles each year in a fully electric vehicle would face an annual eVED bill of around £750. Those covering 30,000 miles could expect to pay about £900, while drivers clocking up 35,000 miles annually would see that rise to approximately £1,050. Plug-in hybrid drivers would pay half those amounts, equating to £375, £450 and £525 respectively.

Those figures illustrate how the new tax will fall most heavily on motorists who depend on their vehicles for a living. Airport transfer operators, executive private hire drivers and long-distance taxi drivers often exceed 35,000 miles each year, meaning their annual bills could be even higher once inflation-linked increases are introduced.

The new system will operate differently from the fuel duty motorists currently pay every time they fill up with petrol or diesel. Instead, drivers will provide an odometer reading when renewing their vehicle tax and estimate how many miles they expect to drive during the following year.

They will then either pay the estimated amount upfront or spread the cost across the year. At the end of the tax period, a further mileage reading will be submitted and the amount paid will be reconciled. Drivers who have travelled further than expected will pay the difference, while those who have driven fewer miles should receive an adjustment.

Responsibility for administering the new tax will sit with the Driver and Vehicle Licensing Agency, which already manages Vehicle Excise Duty. The Government says mileage readings already recorded during annual MOT tests will help verify the figures supplied by motorists, meaning most drivers should not face any additional inspection requirements.

The policy has been introduced as the Treasury prepares for a long-term decline in fuel duty receipts. As more motorists move to electric vehicles, income from tax collected at the fuel pump is expected to continue falling.

The Government argues that all vehicles contribute to congestion and wear on the road network and that electric vehicle drivers should make a comparable contribution based on how much they drive, rather than how much fuel they purchase.

For the taxi and private hire industry, however, the proposals are likely to renew debate about the additional financial pressures facing professional drivers. Over recent years, many have invested heavily in electric vehicles to comply with tougher emissions policies and clean air initiatives, often paying a premium over equivalent petrol or diesel models.

While electric vehicles generally remain cheaper to run than conventional alternatives, the introduction of a mileage-based tax will narrow some of those savings, particularly for drivers covering tens of thousands of miles every year.

With the new system due to begin in April 2028, mileage will become another significant operating cost for electric taxi and private hire drivers. As the industry continues its transition towards zero-emission vehicles, the amount a driver covers each year will play an increasingly important role in determining the true cost of going electric.