The government has announced that from 1 April 2028, electric and plug-in hybrid cars will pay a new mileage charge, Electric Vehicle Excise Duty (eVED), on top of normal road tax. The Budget on 28 October 2026 confirmed it at the rates already proposed, and the government will legislate for it in Finance Bill 2026-27. It is confirmed policy but not yet law. If you sign a three or four-year agreement this autumn, the charge would start part way through it. Here is where things stand, and what it would mean on a lease.
The proposal at a glance
| Item | Proposal |
|---|---|
| Start date | 1 April 2028 |
| Fully electric and hydrogen cars | 3p per mile |
| Plug-in hybrids and range extenders | 1.5p per mile |
| Future increases | In line with CPI inflation from 2029/30 |
| Vans | Out of scope at launch |
| Relationship to road tax | Paid on top of standard road tax, as part of the same licence |
| Miles driven abroad | Included |
What it would cost
| Annual mileage | Fully electric (3p) | Plug-in hybrid (1.5p) |
|---|---|---|
| 5,000 | £150 | £75 |
| 8,000 | £240 | £120 |
| 10,000 | £300 | £150 |
| 15,000 | £450 | £225 |
| 20,000 | £600 | £300 |
The government's own estimate is that the average electric car driver would pay around £240 a year, based on 8,000 miles. Paying a 12-month licence in instalments would cost 5% more.
For context, the Budget announced that petrol and diesel fuel duty would stay at 52.95p a litre until 30 June 2027, then rise to 60.59p from 1 July 2027. The government will introduce legislation for those future rates. At the current 52.95p rate, a petrol car averaging 45 miles per UK gallon pays roughly 5.3p a mile in fuel duty alone, before VAT. So eVED would narrow the tax gap between electric and petrol cars without closing it.
How the charge would be collected
At each road tax renewal, the keeper would give an odometer reading and estimate the mileage for the year ahead, then pay upfront or in instalments. The actual mileage is reconciled the following year, and MOT readings are used to check declarations. For new cars, the government dropped its proposed extra checks before the first MOT: keepers estimate, and the first MOT settles the difference. Unused miles would normally carry forward. The Budget added three changes: a mileage estimation tool available at launch, an opt-in "eVED Connect" system that uses the car's own connectivity so you do not have to report mileage by hand, and an automated refunds system by 2030, for example where mileage was overestimated or the car was sold.
Where it stands legally
- Consultation. Ran from 26 November 2025 to 18 March 2026 and drew 5,133 responses. The government published its response on 13 July 2026.
- Draft law. HMRC published draft clauses for the next Finance Bill on 13 July 2026. The technical consultation closed on 7 September 2026.
- Confirmed at the Budget. The Budget on 28 October 2026 confirmed eVED from 1 April 2028 and said it will be legislated in Finance Bill 2026-27. Until Parliament passes that Bill, it is not yet law.
How it would work on a lease or company car
- The leasing company is liable. On contract hire, the leasing company is the registered keeper, so it is responsible for taxing the car, just as it is for road tax today.
- Mileage estimated centrally. Leasing and rental companies will be able to estimate mileage centrally, and the government expects that estimate to reflect the contracted mileage allowance in most cases. Bulk licensing and payment are planned.
- Passing on the cost is not yet defined. The government has not set how, or whether, leasing companies pass eVED to drivers. It has said that where eVED is passed through lease payments, the usual VAT treatment of lease payments applies.
- Businesses can deduct it. Where eVED is incurred wholly and exclusively for business, it will generally be deductible as a business expense, like road tax.
- Two open questions. The government has not said how eVED will be handled on agreements signed before it was announced, or whether it affects company car Benefit in Kind.
How much of a new agreement it could cover
eVED would start at a car's first road tax renewal after 1 April 2028, not on 1 April itself, so the month the car was first taxed matters. For a new car first taxed in October 2026 and renewed each October, on the timing proposed so far:
| Agreement length | Ends | First eVED renewal | Months under eVED |
|---|---|---|---|
| 24 months | October 2028 | October 2028 | None |
| 36 months | October 2029 | October 2028 | 12 |
| 48 months | October 2030 | October 2028 | 24 |
The same pattern holds for any new car whose agreement starts between April 2026 and March 2027: a two-year agreement ends at its first eVED renewal, and each further year adds a year under eVED. An agreement starting in April 2027 or later reaches eVED at its first renewal, one year in. Bulk licensing for leasing companies could change this timing for leased cars, and that detail has not been published.
What to do if you are leasing now
- Check your end date. If your agreement runs beyond your car's first road tax renewal after 1 April 2028, eVED may apply for the rest of it. The table above shows how that works for an agreement starting now.
- Ask the question before you sign. Ask whether road tax is included, whether the rental can change if new vehicle taxes are introduced, and how any eVED would be recovered.
- Set a realistic mileage allowance. If leasing companies estimate eVED from contracted mileage, an accurate allowance matters more than ever.
- Keep it in proportion. At 10,000 miles, eVED on an electric car would be £300 a year. Company car tax differences are usually far larger: in 2028/29 an electric car is taxed at 7%, while cars in the 1 to 50g/km company-car tax band, including qualifying plug-in hybrids covered by HMRC's temporary easement, move to a flat 18%.
- Vans are unaffected at launch. If you run electric vans, the proposal does not currently apply to them.
If you want help comparing electric and plug-in hybrid options across the full term of an agreement, including eVED as proposed, call Intelligent Vehicle Finance on 01752 429950 or request a callback.
You can also read company car tax to 2030 and the 2028 plug-in hybrid change our guide to company car tax and the advisory fuel rates for company cars from 1 September 2026, or browse electric car leasing and business contract hire. The government's eVED policy paper has the full detail.
Sources: HM Treasury, Budget 2026, 28 October 2026; HMRC policy paper, Electric Vehicle Excise Duty (eVED), updated 28 October 2026; HM Treasury, eVED consultation response, 13 July 2026; HM Treasury, eVED consultation, 26 November 2025; Finance Bill 2026-27 draft legislation, 13 July 2026; Budget 2025; Budget 2026 overview of tax legislation and rates, section 2.18, and Annex A fuel-duty rates, 28 October 2026. eVED is confirmed policy but not yet law; rates and rules may change before it is legislated. The fuel duty comparison is illustrative. This is general information, not tax advice.
Intelligent Vehicle Finance is a credit broker, not a lender, and receives a commission from the lender or funder when an agreement completes. A trading style of XLCR Vehicle Management Ltd, authorised and regulated by the Financial Conduct Authority (FRN 315268). Subject to status and availability.
Editorial responsibility: Stacey Smith, Brand Director, Intelligent Vehicle Finance, who reviewed the previous October 2026 version. This version amended 30 October 2026. Last updated: October 2026.