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The pay-per-mile tax on electric and plug-in hybrid cars is now confirmed for April 2028, and the rules are much clearer than they were a year ago. This guide covers what the charge will cost, why company car tax is the bigger worry for PHEV drivers, and how First Vehicle Leasing would approach an electric or hybrid lease today.
Key Takeaways
- Electric Vehicle Excise Duty (eVED) starts on 1 April 2028. It charges 3p per mile for fully electric cars (EVs) and 1.5p per mile for plug-in hybrids (PHEVs), on top of standard road tax (£200 in 2026/27). From 2029/30 the rates rise with inflation.
- At 8,000 miles a year, that works out at £240 for an EV and £120 for a PHEV.
- Nobody has to fit a tracker. You give an odometer reading when you renew your car tax, and it's checked at the MOT. Sending the reading through the car's own telematics will be optional, and there will be no separate rate that charges PHEVs only for their electric miles.
- From 6 April 2028, every PHEV company car moves to a flat 18% Benefit in Kind rate, rising to 19% in 2029/30. EVs move to 7%, then 9%.
- Any lease of 24 months or longer that starts now will run past April 2028. Budget for eVED and, if it's a company car, for the 2028/29 tax rates.
What Is the Pay-Per-Mile Tax (eVED) and When Does It Start?
Electric Vehicle Excise Duty (eVED) is a charge based on how far you drive. It applies to fully electric cars and plug-in hybrids from 1 April 2028. EVs pay 3p a mile and PHEVs 1.5p a mile, and both still pay the standard annual road tax, known as Vehicle Excise Duty (VED). The Government confirmed the design in July 2026, after a consultation that drew more than 5,000 responses.
The reason is falling fuel duty. Petrol and diesel drivers pay 52.95p per litre at the pump, while EV drivers pay nothing equivalent. The Government says 3p a mile is half the equivalent rate of fuel duty. PHEVs pay half that again because they already pay fuel duty on the petrol they burn.
The DVLA will run eVED through the normal car tax renewal. You'll give an odometer reading, estimate your mileage for the coming year, and pay either upfront or in instalments. Your actual mileage is then settled up against the estimate, with the MOT reading used as the check. After the consultation, ministers dropped the plan for extra mileage checks on cars under three years old. At launch, only cars are covered. Electric vans and motorcycles are exempt. You can read the full detail in the Government's eVED consultation response.
| Annual mileage | EV (3p per mile) | PHEV (1.5p per mile) |
|---|---|---|
| 6,000 miles | £180 a year | £90 a year |
| 8,000 miles | £240 a year | £120 a year |
| 10,000 miles | £300 a year | £150 a year |
| 15,000 miles | £450 a year | £225 a year |
These figures use the 2028/29 launch rates and are charged on top of VED. If you're new to the terminology, our Electric Car Guide is a good place to start.
Will PHEV Drivers Be Tracked or Charged Only for Electric Miles?
No to both. The Government has ruled out compulsory trackers and GPS journey data, so eVED works on odometer readings alone. An optional telematics route for sending your mileage automatically is planned. The idea of charging PHEVs only for their electric miles was rejected as impractical, so every PHEV pays 1.5p on every mile it covers.
Fairness is a real issue here. The 1.5p rate assumes a PHEV covers about half its miles on battery power, and real-world studies suggest that's optimistic. If you rarely plug in, you'll pay fuel duty at the pump and eVED on the same miles. Campaigners argued that telematics could separate the electric miles from the petrol ones. The Government's response was that asking drivers to report mileage in different modes would not be "a practical or proportionate approach".
In practice, a PHEV is only good value if you charge it regularly. If you can't, a conventional hybrid or a full EV is usually the better choice.
Why Is Company Car Tax the Bigger Issue for PHEVs?
Benefit in Kind (BIK) is the tax you pay on a company car that's available for private use, and for PHEVs it rises far more than eVED costs. Under HMRC's published rates, PHEVs are banded by electric range at 4% to 16% in 2026/27. From 6 April 2028 they all move to a flat 18%, then 19% in 2029/30. EVs only rise to 7% and then 9%.
The bill is worked out as the car's P11D value (broadly its list price including options) multiplied by the BIK percentage, then by your income tax rate. The illustrative example below shows how quickly the gap opens up for a higher-rate taxpayer. The HMRC rates are set out in the company car tax rates 2028 to 2030 guidance.
| Tax year | EV BIK | PHEV BIK | Example: £45,000 EV, 40% taxpayer | Example: £45,000 PHEV with 42-mile range, 40% taxpayer |
|---|---|---|---|---|
| 2026/27 | 4% | 4% to 16% (by electric range) | £720 | £1,800 (10% band) |
| 2027/28 | 5% | 5% to 17% (by electric range) | £900 | £1,980 (11% band) |
| 2028/29 | 7% | Flat 18% | £1,260 | £3,240 |
| 2029/30 | 9% | Flat 19% | £1,620 | £3,420 |
Long-range PHEVs take the biggest hit. A car like the Skoda Kodiaq plug-in hybrid currently sits in a low band because of its electric range. From April 2028 it pays the same 18% as a short-range PHEV. Employers feel it too, because Class 1A National Insurance is charged at 15% of the same taxable value.
Will I be approved?
Five questions, no sign-up, and an honest answer before you apply for anything.
Check my eligibilityIs Salary Sacrifice Still Worth It for an EV After 2028?
For most employees, yes. Even at 7% BIK and 3p a mile in eVED, an electric car through salary sacrifice usually costs far less in tax than a PHEV at 18%. The rental comes out of your gross salary, so you save income tax and National Insurance on it.
First Vehicle Leasing arranges salary sacrifice schemes and Business Contract Hire (BCH). If a lease runs into 2028/29, we look at the tax position for the whole term, not just the first year. Our business leasing guides explain the tax in more detail.
How Does eVED Affect Your Lease Costs?
The direct cost is modest: about £240 a year for an EV at 8,000 miles and £120 for a PHEV. Timing matters more. A 24-month lease starting in October 2026 runs roughly six months into eVED. A 36-month lease runs about 18 months into it, and a 48-month lease about 30 months.
On a lease, the leasing company is the registered keeper. It pays the standard VED, which is normally included in your rental. The Government has confirmed special arrangements for leasing companies, including estimated mileage readings, bulk licensing and bulk paying, and a top-up to settle any outstanding eVED when a car leaves the fleet. What isn't confirmed yet is how each funder will pass the eVED cost on to you, whether through the rental or as a separate recharge. It will depend on the funder's terms, and we'll tell you which applies before you sign. Either way, agreeing a realistic mileage allowance matters more than ever.
So is an EV still worth leasing with this tax coming?
For most drivers who can charge at home, yes. As a rough guide, a petrol car doing 40mpg pays about 6p a mile in fuel duty, which is double the eVED rate. Since April 2026, EVs also get a higher £50,000 threshold before the VED expensive car supplement applies. eVED narrows the running-cost gap, but it doesn't close it.
Should You Lease an EV or a PHEV in 2026?
Based on FVL's experience of arranging thousands of leases, an EV is the stronger choice in 2026 if you can charge at home or at work, whether it's a private car or a company car. A PHEV still makes sense if you regularly drive long distances without reliable charging but can plug in often. For a company car, keep the lease term as short as practical.
Going fully electric
This is the best long-term choice if you have home charging. BIK stays at 7% even in 2028/29. Good places to start are the Kia EV3, Skoda Elroq and Tesla Model Y.
Considering a PHEV
This works if you can plug in most days but need petrol for long trips. The BYD Seal U and Volkswagen Tiguan are both offered with plug-in hybrid versions. If you'll rarely charge, it's a poor fit.
Business or salary sacrifice
Work out the tax for the whole term. Even a 24-month PHEV lease starting now will spend around six months at 18%. Once a lease runs into 2028/29, an EV's BIK advantage is usually the deciding factor.
Before you sign:
- Confirm your realistic annual mileage, because eVED will be charged on every mile.
- Check how much of your lease term falls after April 2028.
- Decide where you'll charge. If the honest answer is "rarely", rule out a PHEV.
- For a company car, compare EV and PHEV BIK for every tax year of the contract.
Where Is Motoring Tax Heading After 2028?
The overall direction is clear. Every driver will pay something towards the roads, and the tax system is being set up to favour fully electric cars over hybrids. eVED replaces falling fuel duty, and the flat 18% BIK rate removes the tax advantage that long-range PHEVs had. Draft legislation has been published for the next Finance Bill.
Opposition hasn't gone away. The BVRLA welcomed the simpler rules for fleets but still says the timing is wrong. Parts of the fleet industry have urged the new Prime Minister to delay the scheme, but no change to the April 2028 start has been announced. Leasing protects you from much of this, because you don't carry the car's resale risk and can simply hand it back and choose your next car under whatever rules apply then.
Cars in this article
Related guides
What Is Salary Sacrifice Car Leasing? UK GuideElectric Car Salary Sacrifice Explained | UK Tax & SavingsExcess Mileage Charges Explained | UK Lease GuideShould I Lease or Buy an Electric Car?View all guidesFrequently Asked Questions
Talk to Our Team Before 2028 Arrives
First Vehicle Leasing has been arranging leases for over 25 years. We're authorised and regulated by the Financial Conduct Authority (FCA) and a member of the BVRLA. We'll show you how eVED and the 2028 BIK changes affect the exact car and term you're considering. Call 0333 003 3325 or browse current deals below.
Sources
- The introduction of Electric Vehicle Excise Duty (eVED): Consultation Response - HM Treasury, GOV.UK
- Income Tax: Company car tax rates 2028 to 2030 - HMRC, GOV.UK
- Government revises eVED proposals - BVRLA
Written by Andy Bell, First Vehicle Leasing.
