eVED pay-per-mile: what it means for fleets and leasing

Electric Vehicle Excise Duty (eVED) is a mileage charge on electric and plug-in hybrid cars that sits inside the existing vehicle tax system. This guide sets out what the government has confirmed, what is in draft law, what the leasing industry expects, and what is still open. Every official figure links to its source, checked on 12 November 2026.

The short answer

• Rates: 3p a mile for battery electric and hydrogen cars, 1.5p a mile for plug-in hybrids and range extenders, from 1 April 2028. The rate is uprated with CPI from 2029-30. The start date is on THRIVE's fleet calendar.
• It is added to vehicle tax, not a replacement. The draft law charges an eVED car "the annual rate applicable to it, plus the eVED charge".
• Cars only at launch. Vans, buses, coaches and HGVs are out of scope "upon its introduction".
• The registered keeper pays. On most leased cars that is the leasing company, which then passes the cost on. The government intends to let fleets declare estimated mileage, normally the contracted mileage, and to license and pay in bulk.
• THRIVE's arithmetic: a battery electric car doing 20,000 miles a year pays £600 in eVED at the 2028/29 rate, against a 2027/28 standard vehicle tax rate of £210. A plug-in hybrid at the same mileage pays £300.
• Still undecided: refunds when a car changes keeper, the opt-in use of connected-car mileage data, and the detail of the fleet arrangements. The government promised an update on the first two by the end of 2026.

The rates and when they start

The rates are confirmed in the Budget 2026 Overview of Tax Legislation and Rates (paragraph 1.76) and in HMRC's policy paper: 3p a mile for battery electric vehicles (BEVs) and hydrogen fuel cell vehicles, and 1.5p a mile for plug-in hybrids (PHEVs). The legislation will be in Finance Bill 2026-27, and the draft clauses set the same rates.

The consultation response of 13 July 2026 added two classifications: range extender vehicles pay the plug-in hybrid rate of 1.5p, and hydrogen fuel cell cars pay the electric rate of 3p. The government's reason for the lower PHEV rate is that these cars still pay fuel duty on the petrol or diesel they burn. It rejected a split by driving mode because it "would require motorists to report mileage driven in different modes".

When a car starts paying

The draft law applies to vehicle licences "taken out under VERA 1994 on or after 1 April 2028". HMRC's policy paper puts it plainly: motorists "will need to pay eVED when they first renew their VED after April 2028". So, as THRIVE's example, a car taxed for 12 months in February 2028 starts paying eVED at its next renewal in February 2029.

The draft law closes the obvious workaround. If more than one licence for an eVED car starts in the year from 1 April 2027 to 31 March 2028, together they are taken out for more than 12 months, and one is still in force on 1 April 2028, DVLA can send a payment notice of £20 a month for a zero-emission car and £10 a month for a plug-in hybrid for each whole month the licence runs after 1 April 2028. HMRC's explanatory note says the purpose is to stop people "delaying entry into the eVED regime by taking out multiple licences before commencement". If a notice is not paid within 28 days, the licence ceases to have effect and the sum is recoverable as a civil debt.

The scale

HMRC expects eVED to affect around 5.6 million vehicles in 2028-29 and to raise £1,115 million that year, rising to £2,285 million in 2031-32. It says the administrative impact on business is negligible overall, but "for some businesses, particularly large fleets, the impact will be material".

Are electric vans exempt from eVED?

Yes, at launch. The government's consultation response says "vans, buses, coaches and HGVs will be out of scope of the tax upon its introduction", because the switch to electric for those vehicles is less advanced than for cars. That wording is a statement about April 2028, not a permanent exemption.

The draft law defines the vehicles in scope. An eVED vehicle is a "light passenger vehicle", meaning one "designed and constructed primarily for the carriage of passengers, with no more than eight seats in addition to the driver's seat", that is zero-emission or a plug-in hybrid and is not a special purpose vehicle. THRIVE's reading is that a van built to carry goods is not designed primarily for passengers, so it falls outside that definition, while passenger versions of van-based models, built to carry people, would fall inside it. DVLA has said it "will publish a full list of vehicles subject to eVED in due course", and that list will settle edge cases.

Also out of scope at launch, according to the consultation response and the explanatory note:

• special purpose vehicles such as motor caravans, ambulances, hearses, armoured vehicles and wheelchair accessible vehicles
• petrol or diesel cars converted to electric
• self-charging hybrids, which the consultation excluded because they "use petrol or diesel as their sole external source of power"

Drivers who are exempt from vehicle tax, for example through the higher rate mobility component of disability benefits, are not exempt from eVED. The draft law says an otherwise exempt eVED car is charged "only by reference to the eVED charge". Miles driven abroad count too: the government decided against "a system of checks to deduct non-UK mileage", estimating foreign mileage at about 2% of car mileage.

How is eVED mileage estimated and checked?

At each vehicle tax renewal the keeper gives an odometer reading and an estimate of miles for the year ahead, and pays on the estimate. At the next renewal the actual miles are reconciled against the estimate. In the draft law, the "estimated mileage amount" is "the estimated mileage multiplied by the per-mile rate", and the next licence adds an "actual mileage adjustment amount" for any difference, positive or negative.

Checks come from the MOT. The government dropped its proposal for extra mileage checks on cars under three years old. The response says those cars will rely on "accurate mileage estimates", with "reconciliation taking place against verified mileage data at the first MOT". DVLA can still require an official check outside the MOT cycle, including for new cars, "where there is a reasonable suspicion of fraud or non-compliance". In Northern Ireland the first MOT, and so the first verified reading, comes at four years.

Paying, topping up and carrying credit

• Payment options are the same as for vehicle tax: monthly, six-monthly or annually, online or at the Post Office.
• Surcharges: the draft law sets the eVED charge at 105% when a 12-month licence is paid in instalments, 110% for a six-month licence, and 105% for a six-month licence paid by direct debit. Any eVED car can take a six-month licence.
• Top-ups: a keeper who expects to exceed the estimate can buy more miles during the year "at the prevailing eVED rate".
• Credits: unused miles are "ordinarily" carried forward and set against the next year. The response's worked example carries the credit as miles, so 1,000 unused miles offset 1,000 miles in the next year even after the rate has risen with CPI.
• Refunds at launch are limited to people in financial hardship: the refund must exceed £100, the change in circumstances must be unforeseen, and the applicant self-certifies. A refund at change of keeper is promised "in future", not at launch.

Odometers and penalties

The draft law creates offences for tampering with an odometer and for possessing, advertising, supplying or installing a "tampering product", with fines up to level 5 on the standard scale. Examiners and police get powers to inspect an eVED car where they suspect an offence, and to prohibit driving one with a faulty odometer. For the existing offence of using or keeping an untaxed vehicle, the penalty base gains the per-mile rate "multiplied by 8000", so an untaxed electric car carries a notional extra 8,000 miles of eVED in the calculation. The response says penalties will be based on those for vehicle tax "with a supplementary penalty level added".

Who pays eVED on a leased or company car?

The registered keeper. The consultation stated that "the registered keeper will also be responsible for providing an accurate mileage reading and making payments for eVED", and the draft law makes the estimate the job of the person who takes out the licence. On leasing, the consultation said arrangements "are typically structured so that the lessor (leasing company) will retain registered ownership of the vehicle. This means the lessor is responsible for taxing the vehicle, rather than the driver."

Arrangement	Usual registered keeper	Who deals with DVLA	How the cost reaches the user
Company-owned car	The employer	The employer	A fleet running cost, unless recharged to the driver
Contract hire or BCH	The leasing company	The leasing company	Through the lease contract, as the lessor sets it
Salary sacrifice car	The leasing company (the employer leases the car)	The leasing company	Lessor to employer, then whatever the employer's scheme passes to the employee
Grey fleet (employee's own car)	The employee	The employee	Paid by the employee; the employer contributes through any mileage allowance

The keeper column is the usual pattern the consultation describes, not a rule: the keeper is whoever is named on the registration document. The last column is THRIVE's summary; the government has not prescribed how lessors recover the cost.

The arrangements for fleets and leasing companies

Chapter 7 of the consultation response sets out "special arrangements" for fleet, leasing and rental businesses. They are confirmed as intentions; the government says it will keep engaging with the sector on "how these special arrangements will be implemented".

• Estimated readings instead of odometer readings. "Fleets will be able to provide estimated mileage readings for their vehicles instead of being required to share actual odometer readings." Updating estimates after an MOT reading is allowed but not required. The government says this lets fleets manage estimation centrally, "removing reliance on the driver".
• The contract mileage as the estimate. The government "would expect the estimated mileage to reflect, in most cases, the contracted mileage allowance for the vehicle", or the fleet average for rental cars.
• No pre-MOT checks. Lessors need not arrange checks on cars that are leased out and "not readily accessible".
• Bulk licensing. Fleets can bulk license and relicense through an API for high volumes or a web interface for lower volumes.
• Bulk payment. "Subject to balancing user insight and complexities of delivery", authorised fleet users will be able to pay eVED and VED for the whole fleet "on a fixed frequency at an aggregate level". That qualifier means the payment design is not final.
• Settling at disposal. Before a car is sold, the operator can clear any shortfall with a top-up. A refund of overpaid eVED at disposal, the sector's main ask, "will not be available for the launch of eVED in April 2028".

How eVED sits with VED, the expensive car supplement and BiK

Vehicle tax and the expensive car supplement

eVED is legally part of vehicle excise duty, so a car pays both. Budget 2026 set out the 2027/28 rates, to be legislated in Finance Bill 2026-27: the standard rate for cars first registered from 1 April 2017 is £210, up from £200 in 2026/27, and a zero-emission car's first-year rate stays at £10. The rates take effect from 1 April 2027, as set out on THRIVE's VED uprating calendar entry. The 2028/29 vehicle tax rates have not been published.

The expensive car supplement applies on top in years two to six. The threshold for zero-emission cars rose from £40,000 to £50,000 from 1 April 2026, for cars registered from 1 April 2025. The higher threshold applies only to zero-emission cars, so a plug-in hybrid stays at £40,000. GOV.UK gives the 2026/27 supplement as £440 a year; Budget 2026's Annex A gives £460 alongside the 2027/28 tables. The supplement is based on list price and eVED on miles, so neither changes the other.

Company car tax (BiK)

On the current rules, eVED does not enter the company car benefit calculation. The cash equivalent is the car's list price times its appropriate percentage, and HMRC's guidance on connected benefits lists "vehicle tax" among the costs that come with a company car. Section 239 of ITEPA 2003 says no income tax arises on a benefit connected with a taxable car. Because eVED is part of vehicle excise duty in the draft law, THRIVE's reading is that an employer paying it on a company car creates no extra benefit charge. HMRC has not yet published eVED-specific guidance, and the consultation response says only that the wider tax treatment "will be in line with VED".

The appropriate percentages for 2028/29, the first eVED year, are 7% for a zero-emission car and 18% for a plug-in hybrid with emissions of 1 to 50g/km, whatever its electric range. The full table is on THRIVE's company car tax data page, with commentary in company car tax rates explained.

Salary sacrifice

Cars with emissions of 75g/km or less sit outside the optional remuneration rules, which HMRC says apply to cars "with CO2 emissions of more than 75 grams per kilometre". For a battery electric car, and most plug-in hybrids, the taxable benefit is the normal cash equivalent however much salary is given up. If a lessor builds eVED into a salary sacrifice rental, the employee gives up more gross pay but, on THRIVE's reading of those rules, pays no more benefit tax. For a car above 75g/km, HMRC says the amount forgone includes amounts for "insurance, servicing, vehicle tax and breakdown recovery", so on THRIVE's reading an eVED element would count. THRIVE's salary sacrifice data page shows the wider sums.

Corporation tax and VAT

The response says eVED incurred "wholly and exclusively for the purposes of business" will generally be deductible, as with VED. Where eVED is passed through a lease, "the existing VAT treatment of lease payments will apply", which for most car leases means recovering 50% of the VAT charged.

Can eVED be recharged to drivers?

Yes, on THRIVE's reading. Nothing in the consultation, the response or the draft law stops a keeper recovering eVED from the person who drives the car, and the consultation said lessors "will likely need to develop new approaches for eVED for drivers to pay the accrued mileage liability". How it is done is a contract matter, and the tax effect of an employee's recharge is untested.

The leasing industry has said how it expects to do it. The BVRLA's October 2026 Leasing Outlook reports that "leasing firms anticipate billing customers an annual or monthly eVED charge pegged to their contract mileages". That is an industry expectation, not a government rule, and the report carries a disclaimer that contributors' views "do not necessarily reflect the official opinion of the BVRLA".

For an employer recovering eVED from an employee, three points apply:

• Deductions from pay need authority. Under section 13 of the Employment Rights Act 1996 an employer may deduct from wages only where a statutory provision or a "relevant provision of the worker's contract" allows it, or the worker "has previously signified in writing his agreement or consent". An eVED recharge needs that in place before the first deduction.
• The rules make no distinction between business and private miles. One rate applies to every mile. As with fuel duty, the government "does not consider it proportionate to distinguish between different types of journeys or locations". An employer that wants to recharge only private miles needs its own mileage records to split them.
• A recharge does not automatically reduce the employee's car benefit. A payment reduces the cash equivalent only if it is required as a condition of private use and is for private use. In CIR v Quigley an employee's payment for insurance did not count, because insurance was needed for business and private use alike. HMRC has not said whether a recharge of eVED on private miles would count. Until it does, treat any BiK reduction as unconfirmed.

The same questions arise when employers reimburse home charging, which THRIVE covers in its guide to reimbursing home EV charging.

What eVED costs: THRIVE's worked table

These are THRIVE's sums at the 2028/29 rates of 3p and 1.5p a mile, paid as a single annual sum. The CPI uprating from 2029-30 is not included because the rate has not been set.

Miles a year	Battery EV (3p)	Plug-in hybrid (1.5p)	BEV eVED against the £210 VED standard rate
10,000	10,000 × 3p = £300	10,000 × 1.5p = £150	1.4 times
15,000	15,000 × 3p = £450	15,000 × 1.5p = £225	2.1 times
20,000	20,000 × 3p = £600	20,000 × 1.5p = £300	2.9 times
30,000	30,000 × 3p = £900	30,000 × 1.5p = £450	4.3 times

Sources: rates from the HMRC policy paper; the £210 standard rate is the 2027/28 figure in Budget 2026 Annex A. The last column is the BEV eVED divided by £210, rounded to one decimal place. The 2028/29 VED rate is not yet known, so this compares eVED with the latest confirmed standard rate.

On these assumptions:

• Paying monthly adds 5%. Under the draft surcharge rule, a battery electric car at 20,000 miles paying by instalments on a 12-month licence would pay £600 × 105% = £630, or £52.50 a month.
• A BEV at 20,000 miles pays more in eVED than in standard vehicle tax. Adding the £210 standard rate gives £810 in vehicle tax and eVED together, before any 2028/29 VED uprating and before the expensive car supplement.
• A plug-in hybrid pays half the BEV figure at every mileage, plus fuel duty on any petrol or diesel it uses.
• Against fuel duty: the November 2025 consultation estimated that the average petrol or diesel car pays "around 6 pence per mile" in fuel duty. On that figure, 20,000 miles carries about £1,200 of fuel duty, twice the BEV's eVED.

Effect on whole-life cost

eVED turns a fixed annual tax into a running cost per mile. For whole-life cost models, that means adding 3p a mile to a battery electric car's energy cost per mile, and 1.5p to a plug-in hybrid's, from each car's first tax renewal on or after 1 April 2028. THRIVE's cost to charge data page gives the electricity cost per mile that eVED sits on top of.

Over a contract the totals add up. THRIVE's sums, at the 2028/29 rate with no CPI uprating, for a car whose whole contract falls after its first eVED renewal:

Contract	Total miles	Battery EV	Plug-in hybrid
4 years at 10,000 a year	40,000	£1,200	£600
4 years at 20,000 a year	80,000	£2,400	£1,200
3 years at 30,000 a year	90,000	£2,700	£1,350

Each figure is total miles times the per-mile rate. With positive inflation the real cash cost will be higher from 2029-30, because the rate rises with CPI. The government's own illustration uses a 2% CPI to take 3p to 3.06p; it is an example, not a forecast.

Two things limit the effect in practice. First, a car's first eVED year begins at its first renewal after 1 April 2028, so a fleet's 2028/29 bill covers only part of a year for many cars. Second, eVED scales with mileage, so it moves the cost comparison most for high-mileage drivers. At market level, the OBR assessed, as quoted in HMRC's policy paper, that eVED and the related Budget measures would reduce EV sales by around 120,000 between 2025-26 and 2030-31, about 2% of expected EV sales.

What it means for leasing

Rentals

Because the lessor is usually the keeper, eVED arrives as a cost to the lessor first. With fleet estimates expected to follow contract mileage, THRIVE's reading is that eVED becomes a mileage-linked line in the rental or a separate recharge. Whether that is a monthly amount, an annual invoice or an end-of-contract reconciliation is for each lessor to decide.

Where actual miles exceed the contract, the excess eVED shows up at the next reconciliation, after the first MOT or when the lessor updates its estimates. Lessors will need contract terms that say who pays for over-mileage eVED and when.

Quotes signed before April 2028 for contracts that run past it

Respondents raised "the implications for existing multi-year contracts agreed prior to the introduction of eVED" and asked for "appropriate treatment for existing lease arrangements". The government response does not offer any transitional relief for existing contracts. eVED applies to every eVED car from its first renewal on or after 1 April 2028, whenever the lease was signed. Whether a lessor can pass it on under an existing contract depends on that contract's terms on tax changes. A three or four-year electric car contract signed now runs into the eVED period, so the quote's treatment of eVED is worth checking in writing before signing.

Residual values

Pre-paid mileage credit stays with the car when it is sold. The government "expects the value of the credit to be reflected in the sale price", and DVLA's Vehicle Enquiry Screen will show how much mileage has been paid so buyers can compare it with the odometer. With no refund of a credit at launch, over-estimating mileage on a car about to be sold costs the lessor money unless the buyer pays for the credit.

The BVRLA's Leasing Outlook puts the wider worry in the words of its contributors: the effect of the eVED charge on demand for new and used EVs is "equally troublesome to residual value risk takers", because used buyers do not do a fleet-style cost calculation. It also reports that mileage terms are falling across contracts. These are industry views, not measured effects; there are no used-market data on eVED yet because it has not started.

THRIVE's guide to leasing or buying company cars and vans covers the wider funding choice.

What it means for fleet policy

• Mileage caps and allowances. If lessors bill eVED against contract mileage, the contract mileage on each car becomes a tax estimate as well as a residual value assumption. Setting it too high prepays eVED that cannot be refunded at disposal at launch; setting it too low builds up a balancing payment.
• Car against van choice. eVED applies to electric cars from April 2028 and not to vans at launch. Where a role could use either, that difference appears in running cost from 2028, and could change if vans are brought in later. THRIVE's guide to buying an electric van covers the van side.
• Grey fleet. An employee using their own electric car for work is the keeper and pays eVED on all their miles, business and private. Mileage allowances do not change automatically. The tax-free approved mileage rate for cars is 55p for the first 10,000 business miles from 2026-27, and Budget 2026 raises the rate above 10,000 miles from 25p to 35p from 6 April 2027. The response says HMRC's simplified mileage rates for the self-employed "cover eVED"; it says nothing about whether the employee rates were set with eVED in mind. Current figures are on THRIVE's mileage rates data page and in mileage allowance rates explained.
• Renewal timing. A fleet's eVED start date is spread across the year by each car's renewal date. Taking out extra licences in 2027/28 to delay entry can bring the draft law's £20 or £10 a month payment notice.
• Data. Bulk licensing by API rewards fleets that already hold clean odometer and contract mileage data. The opt-in use of connected-car mileage could reduce manual work, but its design is not yet published.

What is still undecided

• Refunds at change of keeper and other lifecycle events. Promised "in future", with details "by the end of the year". None had been published by 12 November 2026.
• Opt-in connected-car reporting. The government will develop optional use of mileage that cars already report and "provide a further update by the end of the year".
• How the fleet arrangements work in practice. Estimation, bulk licensing and aggregate payment are intended; the government will "engage further" on how estimation works, and aggregate payment is subject to delivery.
• The final law. The legislation is in draft for technical consultation and will be in Finance Bill 2026-27. Details such as the "assessment date" for each licence will be set in regulations.
• Penalties, appeals and disputes. Still being finalised.
• Taxis and private hire vehicles that are exempt from the MOT: the approach to official mileage readings is still being worked out.
• Vans. Out of scope "upon its introduction". No date or plan for bringing them in has been announced.
• HMRC guidance on eVED and company car benefit, salary sacrifice and recharges has not been published.

About this guide

THRIVE researched this guide from primary sources: HM Treasury's consultation of November 2025 and its response of 13 July 2026, HMRC's eVED policy paper (updated 28 October 2026), the draft Finance Bill clauses and explanatory note, Budget 2026's Overview of Tax Legislation and Rates and its Annex A, GOV.UK's vehicle tax tables, HMRC's Employment Income Manual and legislation.gov.uk. Industry views come from the BVRLA's Leasing Outlook and are labelled as such. The worked tables are THRIVE's arithmetic and are stated on their assumptions.

It does not cover taxis and private hire vehicles in detail, Northern Ireland's MOT arrangements beyond the four-year point, or individual leasing companies' contract terms. It is not tax advice.

THRIVE will review this guide when the government publishes its promised end-of-2026 update on refunds and connected-car reporting, when Finance Bill 2026-27 is introduced, when DVLA publishes eVED guidance or its list of vehicles in scope, and when the 2028/29 vehicle tax rates are announced.

Cite as: THRIVE, eVED pay-per-mile: what the 2028 electric vehicle mileage charge means for fleets and leasing companies, thrivefleet.co.uk. The figures are free to quote with a link to this page.