What Is the Proposed Pay-per-mile Car Tax Scheme?

The UK is exploring a pay-per-mile car tax to replace the revenue that fuel duty currently provides. As electric cars and hybrids reduce emissions—and fuel sales fall—the Treasury needs a new mechanism. This guide explains the proposed pay-by-mile system, how pay-per-mile car tax bands might work, and what drivers can do today.

Keep our MOT & Tax checker handy for current VED info, and read the electric car road tax guide to see how standard charges evolve before per-mile arrives.

Why is the UK considering pay-by-mile car tax?

Fuel duty raises over £20bn annually. As EV adoption accelerates, a usage-based tax keeps revenue stable while still rewarding efficient vehicles. Pay-per-mile car tax changes could also reduce congestion if higher rates apply at peak times or in busy zones.

How would per-mile car tax bands work?

Early proposals mention multiple bands: City, Motorway, Rural, plus vehicle-specific rates (cars vs vans). Emissions tiers may mirror today’s CO2 categories, so greener vehicles pay less per mile. Heavy goods vehicles could face higher bands to reflect road wear.

  • Per-mile pricing would replace at least part of today’s flat-rate VED and fuel duty by charging drivers according to distance travelled.
  • Pilot schemes are expected to start with EV fleets on motorway corridors, reporting mileage through telematics or smart charging infrastructure.
  • Rates are likely to vary by vehicle class, emissions profile, and potentially by time of day—mirroring how pay-per-mile car tax bands are referenced in Treasury papers.
  • Any pay-by-mile system must integrate with existing MOT, insurance, and congestion-charge databases so enforcement stays seamless.

Estimating the cost with a car tax per mile calculator

Until official rates arrive, assume 2–3p per mile for EVs and 4–5p for ICE vehicles. Multiply by your annual mileage (e.g. 10,000 miles) to get a rough figure (£200–£500). Add the current £190 flat rate to model a hybrid system. Businesses can build more detailed calculators using telematics data.

Proposed timeline

  • Spring 2025: Government publishes the consultation on new car tax per mile proposals, including example pricing bands.
  • Late 2025: Closed-road or motorway pilots begin with volunteer EV fleets to test telematics accuracy and billing.
  • 2026: Results from the pilots inform whether per-mile car tax changes start replacing part of VED in the late 2020s.
  • 2027+: If adopted, nationwide rollout would phase in gradually, with calculators and apps helping drivers estimate annual costs.

What should drivers do now?

  1. Track your mileage for a few months to see how a pay-per-mile bill would compare to today’s flat rate.
  2. Keep your VED up to date using our MOT & Tax checker so you’re compliant during the transition.
  3. Review our 2026 car tax changes to understand the near-term rules before mileage-based pricing appears.
  4. Businesses should audit telematics readiness so they can feed accurate data into any future pay-by-mile platform.

Related guides

Explore our coverage on EV road tax, luxury car supplements, and taxing a car without a log book to stay fully informed.

Frequently Asked Questions

It is a DVLA/HM Treasury concept that charges drivers for each mile travelled instead of collecting most revenue through flat-rate VED and fuel duty. Early proposals focus on EVs, because they currently pay little or no fuel duty.

Not immediately. The consultation suggests a hybrid model where a smaller flat fee remains, with pay-by-mile car tax adding a usage-based element. This stops high-mileage drivers from effectively driving tax-free in zero-emission cars.

Yes. Expect separate bands for private cars, vans, and HGVs, plus higher rates for peak travel or congested zones. Environmental factors—such as CO2 or vehicle weight—may also influence the pence-per-mile charge.

Use a car tax per mile calculator once the Treasury releases sample rates. For now, multiply your annual mileage by a provisional rate (e.g. 2–3p per mile for EVs) and add the current £190 standard rate to model a blended system.

What Is the Proposed Pay-per-mile Car Tax Scheme? | VehicleScore