Pay-Per-Mile Tax Sparks Industry Backlash: What Dealers And Brokers Need To Know

Why The New Mileage Tax Has Hit A Nerve

The government has confirmed that from April 2028, electric cars will face a 3p-per-mile charge, and plug-in hybrids will pay 1.5p per mile. What was framed as a “fairness measure” has instead landed like a hammer across the motor trade.

Manufacturers aren’t happy. Dealer groups aren’t happy. Consumer groups aren’t happy.
And judging by early polling, drivers certainly aren’t.

For an industry trying to stabilise EV demand after years of peaks and troughs, this new tax arrives at exactly the wrong time.

Here’s why it matters, and what it means for dealers and brokers who’ll have to explain it to customers.

What The Tax Actually Does

A Two-Part Cost For EV Drivers

From 2028, EV owners will pay:

• VED (standard road tax) - around £195 per year
• eVED (the new mileage charge) - 3p per mile for BEVs, 1.5p for PHEVs

For a typical 8,000-mile driver, that’s:

• £240 per year for a BEV
• £120 per year for a PHEV
• Plus standard VED

The total EV tax for many will fall between £315 and £435 per year.

On paper, that’s still cheaper than the fuel duty petrol and diesel drivers pay.
But perception is everything, and the industry is saying this sends the wrong message at the wrong time.

Why The Trade Is So Frustrated

1. It Undercuts Growing EV Confidence

2024–25 was the first real period where EV sales began to settle:

• Used EV prices stopped free-falling.
• Older EV stock finally started moving.
• Public charging investment stepped up.
• Range anxiety reduced for many buyers.

Dealers describe the new tax as “throwing cold water over a warming market”.
Instead of simplifying the EV message, the government has added another cost for sales teams to untangle.

2. Plug-In Hybrids Feel Unfairly Targeted

PHEVs already face stricter emissions tests, higher BIK steps, and scepticism over real-world efficiency.

The industry reaction to the 1.5p-per-mile rate has been blunt:

“Unhelpful.”
“Punitive.”
“Makes no sense when we’re trying to nudge people into lower-emission cars.”

For many buyers who use a PHEV correctly (short, frequent trips on electric, motorway with petrol), the tax feels disconnected from how they drive.

3. It Punishes High-Mileage Drivers, The Ones Who Benefit Most

EV value improves with mileage because the running costs drop sharply compared to petrol.
The new system does the opposite; it charges them more.

Taxi fleets, last-mile delivery, and high-use commuter buyers are the most vocal groups pushing back.

4. It Adds Complexity Dealers Don’t Need

Dealership teams are already juggling:

• Electrification targets
• Charging grants
• BIK tiers
• Range-vs-battery-health conversations
• Rapid changes in EV residual values

Now they need to explain another cost line that varies per customer.

In an industry where simplicity sells, complexity kills conversions.

What Buyers Will Now Ask You

Expect these three questions on repeat:

1. “How much will this cost me each month?”
   Dealers must be ready with mileage-based examples, not annual figures.
2. “Is it still cheaper to run than petrol?”
   For home chargers, usually yes.
   For public-only chargers, sometimes no.
3. “Will EVs drop in value again?”
   Residuals will be sensitive. Dealers should avoid promises and stick to data from live market tools.

How This Might Reshape The Market

EV Demand May Dip Before Stabilising

Analysts expect the tax to shave 20k–30k EV sales per year from future forecasts.
This isn’t a collapse, more of a stumble.

PHEVs Could See A Bigger Hit

They sit between worlds:

• Not cheap enough for budget buyers
• Not clean enough for EV purists
• Now facing extra mileage taxation

Expect some customers to shift back toward efficient petrol or hybrid options.

Petrol, Diesel And Hybrid Stock Could Strengthen

The more complicated EV ownership becomes, the more buyers lean back to what they know.
This is especially true for 3-6-year-old petrol and diesel cars, which remain the easiest to explain, fund and maintain.

What Dealers And Brokers Should Do Now

Be First With Clear Examples

When tax is confusing, the business that explains it best wins the trust.

• Show monthly examples at 5k / 8k / 12k miles per year
• Keep the tone simple:
  “Here’s what it means for you, based on how you drive.”

Make EV The Right Choice, Not The Hard Sell

Good use-cases still exist:

• Long-distance motorway drivers
• Company-car buyers chasing low BIK
• Home charger owners
• High-mileage private drivers

EVs aren’t the wrong answer. They’re just no longer the automatic answer.

Watch Residuals Carefully

PCP GFVs for EVs will need regular review. Uncertainty always hits future values first.

Hybrids and ICE stock should benefit, especially in the 3–5-year age bracket.

Where Marsh Finance Supports Dealers Through This Shift

We don’t fund EVs directly today, but the EV market still shapes the whole used-car landscape, including the petrol, diesel and hybrid cars we do finance.

We help partners by:

• Supporting fast decisions on HP & PCP for ICE and hybrid stock
• Offering near-prime options so real-world customers aren’t excluded
• Helping you communicate changes to customers without jargon or confusion

Learn more about partnering with Marsh Finance today!