Would it be cheaper for you to run an electric or petrol car with pay-per-mile EV tax? Work it out based on YOUR driving

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Pay-per-mile tax on electric vehicles was the bombshell motoring policy announced in Rachel Reeves' Autumn Budget last week.

With fuel duties currently generating around £25billion a year for the Treasury, the Chancellor needs to plug the fiscal black hole as drivers shift to electric cars - and are then no longer able to buy new petrol and diesel cars from 2030.

Her plan was revealed in the shape of electric Vehicle Excise Duty (eVED). The 3p-a-mile tax will be levied on top of existing car tax from 2028, with the average UK driver who covers 7,400 miles per year forced to cough up £222 extra annually.

So, what would be the impact for you if the tax was introduced today? And - most importantly - would it still be worth owning or buying an EV?

Our calculator below shows you how much pay-per-mile would add to your costs. 

Plus, This is Money crunched the numbers to reveal the impact eVED would have on annual bills for a variety of drivers, how much of their yearly charging costs would be tax, and how this all compares to running a conventional petrol car...

Pay-per-mile plans for EVs 

While pay-per-mile will be levied at 3p a mile from 2028, the rate will be increased in-line with CPI inflation each year thereafter.

The Treasury expects an EV driver will pay around £20 per month or £240 annually (based on 8,000 miles per annum) when it is introduced, which is half what a typical petrol or diesel driver pays in fuel duty.

But this raises the very important question about whether the pay-per-mile charges will push EV running costs higher than a petrol equivalent.

While energy and fuel prices can change dramatically between now and April 2028 - when eVED is due to be introduced - we have calculated the impact on running costs today. 

Since April, electric cars have been subject to the same standard rate of VED as petrol and diesel models (£195-a-year), so we did not include this in our calculations.

We are also omitting servicing and maintenance costs, which can vary by brand and model - though EVs are typically cheaper due to longer servicing intervals and fewer moving parts that wear with use.

Therefore, our figures for EVs are based on the cost of charging with pay-per-mile of 3p on top. This is then compared to the running costs of a petrol car covering the same mileage using average fuel pricing for the same period.

We will also tell you what percentage of charging and fuel costs - per mile and for annual bills - is taxation.

The calculations are based on prices published in the AA's latest Recharge Report for October.

The cars used for comparison purposes are the Vauxhall Corsa petrol (1.2-litre 100PS with a 40-litre fuel tank) and the Corsa Electric (50kW battery with a range of 221 miles).

Value retention is also another important factor to consider when estimating running costs, especially when deciding between a petrol car and EV.

This is because EVs are depreciating far quicker than combustion engine models currently.

In the case of the Corsa, the petrol model will lose around 41 per cent of its recommended retail price in the first three years of ownership (with an average of 36,000 miles), while the Corsa-Electric will shed 60 per cent of its original market value when new.

However, it is incredibly difficult to factor depreciation into a running cost calculation due to the number of variables at play. The biggest is the actual price paid in the showroom, with drivers able to negotiate discounts - especially with the Electric Car Grant in place shaving £1,500 off the price of the electric Corsa.

For this reason, we have not included value retention in our calculation. 

Motorists who have charging facilities at home are still far better off, even with pay-per-mile

EVs are £200 cheaper per year to run...but only if you can charge at home

According to the Department for Transport, nine in ten (91 per cent) of the nation's EV owners have access to charging at home; and three quarters of them have a dedicated wallbox installed.

Therefore, this comparison of running costs for electric versus petrol is most relative to Britain's EV ownership. 

And even with the implication of pay-per-mile taxation, electric cars that are predominantly charged at home would still be cheapest option available.

According to the AA's pricing data, EV drivers who exclusively charge using their domestic energy tariff will still pay less than petrol car owners - even in a worst-case scenario.

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The motoring group's domestic charging costs are calculated using the Ofgem price cap as the default rate to showcase the most expensive possible home tariff.

Even in this scenario, with a rate of 26p per kWh, the cost to run an EV works out at 8.9p per mile with eVED included - or £435.12 per annum based on a 7,400-mile average.

How does this compare to filling up the equivalent Corsa with a petrol engine?

Based on average price of a litre of fuel in October - which was 135.2p - the average petrol car owner was paying 11.8p per mile last month. This takes the average annual fuel bill to £875.42.

However, EV owners who charge at home are likely to be get a far better deal this.

That's because the domestic charging prices quoted by the AA are not fully reflective of what EV drivers typically pay.

The majority of those with a domestic wallbox will too have a dedicated EV domestic energy tariff with off-peak rates as low as 7p/kWh if they charge during the early hours.

It means the majority of EV owners will be paying around a third of the figures quoted by the AA.

While the calculations based on the AA's latest charging figures suggest drivers who charge at home would be saving over £200 a year with pay-per-mile included over a petrol car

However, the data shows that pay-per-mile tax will add a significant cost to these drivers.

Domestic charging is levied by a reduced VAT rate of 5 per cent, which is partly why plugging in at home is by far the cheapest option for electric car drivers. 

However, inclusive of VAT and pay-per-mile tax, some 37 per cent (3.3p) of what domestic chargers pay would go direct to the Exchequer.

It means around £243 of their theoretical annual charging bill (£657) will be taxation. 

This is still a far smaller proportion than petrol drivers pay in taxation, with fuel duty and VAT combined making up around 56 per cent of every litre. 

While drivers using the slowest public chargers (up to speeds of 8kW) are likely to spend less running an EV compared to filling up a petrol car currently, the inclusion of pay-per-mile taxation tips the balance and makes an electric vehicle pricier by around £180 annually

What if you can't charge an EV at home? 

For the 9 per cent of EV owners in Britain who do not have access to homecharging, they are likely already paying more per mile to drive than motorists with petrol cars, even without eVED added to their costs.

This is because public charging - which is inclusive of 20 per cent VAT - is significantly pricier than plugging into a homecharger. 

The AA's Recharge Report shows that the average EV driver who typically uses slow chargers (with speeds up to 8kW) were paying 11.3p a mile, which is around 0.5p less than a petrol car owner.

However, with 3p per mile added to the equation, even using the slowest public devices, an EV will be pricier to charge than it is to fill up a traditional car with unleaded.

And the calculations show the rising costs for EV owners if they use faster charging points.

EV owners who rely on using the fastest ultra-rapid chargers - typically those found at motorway services - are already paying far more in running costs than a petrol car driver

Those using 'fast' devices (8 to 49kW speeds) are currently paying around 13.8p a mile, rising to 16.8p inclusive of eVED.

Any driver making the most of the nation's fastest charging devices - ultra-rapid chargers, which are typically found at motorway services and offer speeds up to 150kWh - can be paying as much as 17.3p per mile, rising to 20.3p with eVED levied on top.

It means EV owners who use only use these devices could - in theory - pay as much as £1,527 a year in charging costs with pay-per-mile included, which is almost twice the annual fuel receipts of drivers with petrol cars (£875) covering the same 7,400 miles. 

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Tax benefit of running an EV will remain

One of the most cost-effective ways of owning an electric car has been through salary sacrifice schemes.

This allows employees to lease EVs through their employers, paying the monthly costs with pre-tax salary deductions.

This reduces the employee's taxable income, leading to savings on income tax and National Insurance (NI) contributions. 

And because Benefit in Kind (BiK) tax rates for EVs are far lower than a petrol and diesel car equivalents, drivers get a much better deal if they choose a battery-powered car.

The BiK rate for an EV for 2025-26 is just 3 per cent, while for petrol cars with the highest CO2 emissions it can be as high as 37 per cent. 

By 2027-28, when pay-per-mile is introduced, BiK on electric vehicles will still be comparably low at 5 per cent (petrol and diesel at 37 [er cent), though by 2029-30 rises to 9 per cent while petrol and diesel cars will incur BiK at up to 39 per cent. 

What experts say about the implication of EV pay-per-mile tax...

Ginny Buckley, chief executive of dedicated EV website Electrifying.com, has also been crunching the numbers on the impact of pay-per-mile tax on electric car running costs.

She said: 'eVED nudges up EV running costs, but the maths is clear - for most people, electric still beats petrol.'

However, like our calculations show, Ginny says the major catch is whether you have access to homecharging or not.

'The drivers at risk are those who rely on public chargers - estimated to be one in four licence holders - who now face paying more per mile than a fuel-efficient petrol car,' she said.

'We want that disparity front and centre in the pay-per-mile consultation - because the switch has to be fair to everyone, not just those with driveways.

'That is why the home-charging grant needs to come back: installs can top £1,000, and that upfront hit needs support.

'Public charging also carries a higher rate of VAT, and that unfair gap has to be fixed.'

Ginny Buckley, chief executive of dedicated EV website Electrifying.com, has also been crunching the numbers on the impact of pay-per-mile tax on electric car running costs

Buckley also says energy companies need to 'shout louder' about dedicated EV tariffs. 

When it and the AA surveyed 11,000 UK drivers, only 55 per cent knew there were energy tariffs tuned specifically for EV drivers, which Ginny says is a 'huge missed opportunity'.

Edmund King, president of the AA, who has developed his own road pricing scheme, added: 'If people look at the full figures of EV ownership plus the 3p a mile - and if they can charge at home - they will still be far better off.'  

Bad news for petrol drivers too - prices are on the rise

There's bad news this week for owners of conventional internal combustion engine cars too.

That's because pump prices continue to rise this week despite wholesale costs nose-diving almost a fortnight ago. 

It comes after the Chancellor not only spared motorists an increase in fuel duty but the fuel trade having to fork out more to buy their deliveries of fuel.

On Monday, petrol rose to an average of 137.5p a litre - more than 5p higher than prices seen in October. Diesel has risen to 146.9p per litre this week. 

This week’s averages place petrol at its highest since mid-March and diesel back to where it was in early March.

Data released this week by the Department for Energy Security and Net Zero show that in the past fortnight the weekly road fuel prices they monitor have gone up more than 1.5p a litre up for petrol, with diesel up more than 2p.