PAY-PER-MILE: Chancellor’s new EV road charge triggers warnings from major taxi and private hire operators over rising driver costs
- Perry Richardson
- 10 minutes ago
- 5 min read
Private hire and taxi firms say the 2028 pay-per-mile levy could slow electric vehicle adoption despite fresh government support for charging and grants.
The Government’s plan to introduce a road charge for electric and hybrid vehicles from April 2028 has drawn sharp criticism from leading operators in the private hire and chauffeur sectors, who warn the new measure risks derailing fleet electrification efforts already under strain.
The Budget confirmed that electric vehicles will be subject to a 3p per mile charge, while plug-in hybrids will face 1.5p per mile, with both rates rising annually with inflation. The Treasury intends to collect the charge using annual mileage checks at MOTs or registration anniversaries, feeding the data into the existing Vehicle Excise Duty system. The government acknowledges the risk of increased odometer tampering and is consulting on safeguards.
Addison Lee’s chief operating officer Patrick Gallagher said the new levy, combined with diminishing EV incentives, creates an increasingly unviable environment for operators managing high-mileage fleets. He cited internal estimates that place the annual cost of the scheme at around £840 per EV and £420 per plug-in hybrid for its drivers. Gallagher added that the removal of the Congestion Charge exemption for EVs next year will add up to £4,700 in extra annual costs for a typical driver in London. The company had previously electrified at scale, but Gallagher said national and local decisions had forced a return to greater use of plug-in hybrids to maintain service reliability and price stability.
Gallagher said: “Any positive measure to drive electric vehicle adoption in today’s Budget is undermined by the introduction of a pay-per-mile charge for EVs.
“For taxi and private hire vehicle operators, these new charges, combined with the continued withdrawal of practical incentives, make running EV fleets across the UK increasingly difficult.
Addison Lee estimates the cost of a pay-per-mile levy would be as high as £840 per year for an EV driver on our fleet, and £420 for a plug-in hybrid driver. This additional charge comes on top of the removal of the congestion charge exemption for EVs in London which increases EV running costs in the capital by as much as £4,700 each year for the average driver.
“Despite being the first private hire operator in London to introduce EVs at scale, flawed policy decisions at national and local level have made it unworkable for us to shift to EVs and have forced us to increase our use of plug-in hybrids to maintain reliable, affordable services. Today’s Budget only puts the UK’s electric dreams even further out of reach.”
Freenow by Lyft UK general manager Danny O’Gorman welcomed measures in the Budget to expand charging infrastructure and extend the Electric Car Grant to 2030, arguing they are essential for making EVs cost effective for drivers with limited access to home charging. He said only 42 percent of London’s black cab drivers can charge at home, making VAT on public charging a continuing barrier to adoption. O’Gorman warned that unless taxis and private hire vehicles are exempted from the 2028 charge, operators covering significantly higher annual mileage will face disproportionate increases in operating costs that would feed through to passengers.
O’Gorman said: “We strongly welcome today's announcements to accelerate the rollout of EV charging points and extend the Electric Car Grant until 2030. These are crucial, smart steps that directly support the transition to a greener fleet for everyone. For too long, the lack of accessible charging points has made the cost of transitioning to a greener vehicle too high for drivers. Our figures are stark: only 42% of black cab drivers have access to at-home charging. Reducing the VAT on public chargers is the indispensable next step needed to level the playing field, ensuring more sustainable options are accessible to drivers and giving a crucial boost to the entire Private Hire Vehicle (PHV) and taxi sector.
“However, the proposed April 2028 electric vehicle excise duty must provide clear exemptions for those who drive for a living. The average EV driver travelling 8,500 miles a year is expected to pay £255 annually, but taxis and PHVs routinely exceed this, meaning they would face a disproportionate financial burden for providing safe, sustainable transport services. Taxi drivers in London have already invested over £500million in recent years to transition to greener vehicles; without an exemption, the cost will unfairly punish both drivers and passengers through higher fares. The government must exempt taxis and PHVs to support Net Zero and ensure the transition is fair.”
Blacklane’s UK and Ireland general manager, Dow, raised similar concerns, warning that the combination of the new levy and the end of Congestion Charge exemptions risks undermining progress in high-adoption cities such as London. He said operator collaboration with policymakers will be essential to prevent a slowdown in EV uptake and called for a review of public charging VAT alongside targeted support for professional drivers facing rising ownership costs.
Dow added: “We encourage sustained policy-maker investment and collaboration with industries driving high EV adoption, as well as individual EV owners. This should include enhancing public charging infrastructure, reviewing VAT on public charging as a priority, and targeted support for those now facing higher ownership and running costs ensuring that momentum in EV adoption is supported, and not lost.
“Blacklane is engaged in conversations with our chauffeur partners to fully understand the impact of these changes, and to develop meaningful incentives to ensure EVs are an attractive option to professional chauffeurs. Despite operating environment challenges, we remain committed to EVs remaining the dominant vehicle type on our platform throughout the UK.”
According to the Office for Budget Responsibility, the scheme is forecast to raise £1.1 billion in 2028–29, rising to £1.9 billion by 2030–31, although the yield remains uncertain as it depends on the pace of EV adoption. The OBR expects the levy to increase lifetime ownership costs and reduce EV demand, projecting 440,000 fewer sales, partially offset by other government measures. The tax will apply to all UK-registered EVs regardless of where they are driven, but foreign-registered EVs used in the UK will not be charged.
The Budget also confirmed the extension of the 5p fuel duty cut until September 2026, before duty begins rising annually with RPI inflation. EVs remain subject to Vehicle Excise Duty, including a higher rate for models costing above £50,000, which rises to £440 in April 2026.
While ministers set out the framework for a system intended to replace declining fuel duty revenue, operators warn the timing and structure risk weakening already fragile industry confidence in large-scale EV deployment. With the Government now consulting on implementation, the sector is expected to lobby for exemptions, mitigations or parallel incentives to prevent a slowdown in its transition plans.
