What taxes apply to electric vehicles and when will new petrol and diesel cars be banned?

The Budget announced new per-mile charges for electric vehicles (EVs) and some hybrid vehicles.

All new cars will have to be electric or hybrid from 2030, when a ban on the sale of new petrol and diesel cars comes into force.

From April 2028, electric car drivers will pay a road tax of 3p per mile, while hybrid car drivers will pay 1.5p per mile. Rates will increase with inflation each year.

The Government has previously said it wants a “fairer system for all drivers”, pointing out there is no equivalent fuel duty for petrol and diesel cars.

An EV driver driving 8,500 miles a year is expected to pay around £255. This would be about half the cost per mile that petrol and diesel car drivers pay in fuel tax.

The measure is expected to generate £1.1 billion in the 2028/29 financial year, increasing to £1.9 billion by 2030/31.

The tax will apply to all UK-registered electric vehicles and plug-in hybrids whose mileage is tested annually, usually at the time of an MOT.

The levy will be added to the existing vehicle excise tax system. Consultations are currently underway on the implementation of the scheme.

The rest of the changes have already been made.

On April 1, 2025, vehicle excise duty became payable on electric vehicles for the first time.

For new cars, the first year payment is £10, increasing to the standard rate of £195 in the second year. Those who signed up between April 2017 and March 2025 pay £195 from the start.

Electric cars registered on or after 1 April 2025 and costing more than £40,000 were subject to a 'luxury car tax' of £425 per year. In April 2026 the price threshold will increase to £50,000.

In London Electric vehicle drivers will have to pay for congestion from 2026.

The move is part of the UK government's efforts to achieve a legally binding net zero target by 2050. This means that greenhouse gas emissions cannot exceed those removed from the atmosphere.

Domestic transport, including cars, buses and trains, accounted for more than a quarter of emissions in 2023, making it the largest emitting sector.

Ministers have pledged to ban the sale of new petrol and diesel cars in 2030.

This means that all new cars must be electric or hybrid – with either a combustion engine or an electric motor.

UK drivers will be able to buy new hybrids until 2035.

The EU will not ban the sale of new fossil fuel cars until 2035.

Sales of new all-electric cars are rising steadily in the UK.

Vehicle registrations rose from 29,800 in October 2024 to 36,800 in October 2025, according to motor industry trade association SMMT.

This figure is equivalent to a quarter of new car registrations. The goal is to increase this figure to 80% by 2030.

In October, 73% of new electric vehicles were purchased by businesses or fleets, while 27% were registered to private buyers.

Meanwhile, the second-hand market is growing, but from a low base. SMMT data shows around 80,600 used electric vehicles were purchased between July and September. That's 4% of second-hand sales.

Analysis by Zapmap, a mapper and data provider for electric chargers, shows there are currently at least 1.7 million fully electric cars on UK roads, around 5 percent of the total.

Internal combustion engine cars still make up the vast majority of cars, and people will be able to drive them after 2035.

In July, the government introduced an electric vehicle grant scheme, providing grants of up to £3,750 for eligible models priced at £37,000 or below.

The scheme was launched with an initial fund of £650 million. Additional £1.3 billion. funding was announced in the budget.

Transport Secretary Heidi Alexander told BBC News that subsidizing electric vehicle sales would boost economic growth.

“This is an investment in the future of the country… and the quality manufacturing jobs that come with it,” she said.

Automobile organization The AA said drivers “often tell us that the upfront costs of new electric vehicles are a stumbling block to going electric”.

When it comes to used cars, online marketplace Autotrader says it is “seeing plenty of examples of electric vehicles costing the same or less than comparable gas models, especially in the three to five year age group.”

In addition, around 680,800 electric vehicles are currently being leased, the British Vehicle and Leasing Association (BVRLA) said. This is almost half of all lease agreements.

When it comes to running costs, electric charging can be cheaper than petrol or diesel charging. But it depends on where you charge.

Charging at home – for those who have the opportunity – is significantly cheaper, especially at an off-peak rate.

Home charging is subject to a VAT rate of 5% on domestic energy, compared to the standard rate of 20% for government charging.

Prices can vary greatly when using public charging stations, depending on factors such as the speed of the charger and the time of day. Some apps offer payment discounts.

The fastest and “ultra-fast” charging on the public grid may be even more expensive per mile than fossil fuels.

Automotive groups say electric vehicles tend to be cheaper to maintain.

The range of electric vehicles has increased, as has the number of public charging stations. But concerns remain about whether there are enough of them across the country.

Zapmap data shows there are almost 87,000 in the UK, in around 44,000 locations. These include places such as supermarket car parks and lamppost chargers.

The Chancellor said the government would invest a further £200 million to speed up the rollout of charging points.

In March, a report by the Counting Commission of Deputies stated that Accessibility on motorways was still 'uneven'.

It says the government is on track to meet the minimum of 300,000 points needed by 2030. However, he added that “too few have been installed outside the South East and London, where 43% of all charging points are currently located.”

Since April 2022, the Electric Vehicle Charging Grant program has installed more than 28,000 home charging sockets and almost 14,000 public on-street chargers have been installed across the UK since April 2022, according to the government.