Pay Per Mile

The UK government confirmed plans this week to introduce a pay-per-mile tax for electric vehicles starting April 2028. The measure, called the Electric Vehicle Excise Duty, will apply to both fully electric cars and plug-in hybrids[1].

Drivers of fully electric vehicles will pay 3 pence per mile, roughly 2.2 euro cents per kilometre. Plug-in hybrid owners pay half that, at 1.5 pence per mile. The rate adjusts annually with inflation. For someone driving 15'000 kilometres a year, the charge adds close to EUR300 on top of the existing Vehicle Excise Duty of around EUR235[2].

The government expects the tax to generate GBP1.1 billion (about EUR1.3 billion) in its first year. Drivers can pay in a lump sum or monthly instalments, and they must estimate their annual mileage upfront. At year's end, actual mileage is recorded and submitted. Drive more than estimated, pay the difference. Drive less, get a credit[3].

The reasoning is straightforward. Petrol and diesel drivers pay fuel duty at the pump. Electric vehicle drivers do not. As EV adoption accelerates, fuel duty revenues are falling. Governments need to replace that income somehow, and road wear does not care what powers the car.

The pushback is also straightforward. Consumer advocates call the system too complex, warning that estimated mileage creates financial uncertainty for households. Fleet operators worry about administrative burden. Early adopters feel penalised for buying electric before the tax existed[4].

But the UK is not first here. New Zealand has had road-user charges for light electric vehicles since April 2024. Drivers pay about NZ$76 (EUR42) per 1'000 kilometres for full EVs, half that for plug-in hybrids. Around 40 US states are reviewing similar schemes. Iceland is in the mix too. France will face the same question eventually[5].

The pattern is clear across all of these: fuel duty worked when all cars burned fuel. Now that some do not, governments are scrambling for replacements. Per-mile charging is the obvious answer, but obvious does not mean easy. The political risk is taxing people away from the exact transition you spent a decade subsidising.

Luxembourg has not announced anything similar yet. But with EV market share rising every year and the government heavily invested in charging infrastructure, the question will land here too. The Grand Duchy already charges an annual tax on vehicles based on CO2 emissions. Electric vehicles are currently exempt. That exemption will not last forever, and when it ends, a mileage-based component is the logical next step.

For now, the UK move is worth watching as a test case. If the administrative complexity proves manageable and public anger fades, expect copycats. If it becomes a political disaster, expect delays elsewhere. Either way, the era of electric vehicles paying nothing for road use is ending.