What’s the best fuel type after the 2025 Autumn budget?

What changed: Summary of budget announcements on fuel & EV taxation

What the government announced

• From April 2028, drivers of fully electric vehicles (EVs) will be subject to a new pay‑per‑mile tax of 3 pence per mile.
  
• Drivers of plug‑in hybrid electric vehicles (PHEVs) will pay 1.5 pence per mile under the same scheme.
  
• This new tax, sometimes referred to as “eVED” or “VED + mileage charge”, will be in addition to the existing annual vehicle tax (Vehicle Excise Duty, VED) that applies to all vehicles.

Projected impact & government forecasts

• For an average EV driver doing about 8,500 miles per year, the extra charge would work out to roughly £240–£255 per year.
  
• The government’s own estimates (via the Office for Budget Responsibility, OBR) suggest that the pay‑per‑mile scheme could raise ~£1.1 billion in 2028–29, rising to ~£1.9 billion by 2030–31.
  
• That’s still far less than the roughly £25 billion a year previously raised by fuel duty, underscoring the revenue challenge the Treasury faces.
• The move aims to “replace” some of the lost income from fuel duty as the UK transitions to electric vehicles.
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Other supporting & related measures

• The Budget also reportedly extends support for EV adoption, including continued subsidies or grants for electric cars, and additional funding for charging infrastructure, as part of a broader strategy to support the transition to electric transport.
• The government frames the mileage tax as more “fair,” arguing that tax should be based on how much you drive (i.e. road use) rather than just what type of car you own.

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What’s the likely impact: for drivers, electic vehicle buyers, and the market

For EV / PHEV owners

• EV drivers will start paying more than they do now, likely a few hundred pounds extra per year, depending on mileage. That reduces but does not eliminate the cost advantage EVs had over petrol/diesel.
  
• For plug‑in hybrids, the lower rate (1.5p/mile) somewhat softens the blow, and fuel duty on any petrol used still applies, making hybrids a bit of a middle ground.
  
• For those who drive low miles annually or have access to charging and mostly use the car sparsely, the extra might be manageable. But for high-mileage users, the additional costs will add up.
  
  

For EV demand & market dynamics

• The OBR has warned that the extra charge may reduce demand for EVs: fewer people may switch if long‑term running costs rise.
  
• That’s in tension with the government’s ongoing push to electrify new car sales, so these twin objectives (supporting EV uptake + raising revenue) could clash.
  
• In short: this may slow down the EV transition, or at least change the calculus for buyers comparing EVs with petrol/diesel or hybrids.
  
  

For road funding & fairness

• From a public-finance perspective, shifting to a usage-based model arguably makes sense, drivers contribute roughly in proportion to how much they drive (and thus how much wear they place on roads).
  
• It attempts to restore some of the lost fuel duty revenue caused by rising EV adoption, though the gap will not be closed fully.
  
  

How will they track your mileage?

This is one of the big practical questions, there’s no single method confirmed yet, but discussions suggest a few possible mechanisms.

• According to draft proposals and commentary around the Budget, one option is self-reporting of mileage, typically estimating how many miles you expect to drive over a period (e.g. a year) when you next tax/pay VED.
  
• Another approach could be odometer readings taken at things like annual MOTs or during VED renewals.
  
• A more technologically advanced option, though more controversial, would be a telematics system or GPS/”black‑box” in-car device that tracks miles driven and reports them automatically for billing authorities.
  
• As of now: no final decision has been publicly confirmed about which method will be used. The government has said more detail will follow (likely through consultations, technical reviews, and regulations ahead of 2028).
  

So.there remains uncertainty around compliance burden, data privacy (if telematics is used), and ease of use.
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What this means for car buyers & used‑car shoppers

Given all this, here’s how to think about the impact when you’re shopping for or selling a used car:

• If you expect to do high mileage, the extra 3p/mile (EV) or 1.5p/mile (PHEV) cost should now factor into your “true cost of ownership” calculations, not just purchase price.
  
• Charging access matters more than ever: EVs remain cheapest when you can charge at home (minimising running/fuel costs). But once mileage tax is added, the advantage is narrower, especially if you rely on public chargers.
  
• Hybrids might become more attractive for some buyers, giving flexibility (petrol + electric) with a lower per‑mile tax burden than full EVs.
  
• Transparency is key, at Carsa we help customers run their own cost comparisons (fuel/charge + tax + maintenance + resale value), under different mileage scenarios.‍
• Long‑term resale value and demand could shift, some buyers may think twice about EVs given higher running costs; that might affect future resale values or demand for used EVs/hybrids.
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Which fuel type is right for me?

Still wondering which fuel type is best? Despite new taxes, EVs and hybrids can still offer significant savings on running costs, especially if you can charge at home or do a mix of driving.

Assumptions & Disclaimer (see end of article).

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Choose an Electric vehicle if you…

• Can charge at home (off-street parking with a charger)
  
• Drive 8,000+ miles per year
  
• Plan to keep the car for 3+ years
  
• Want the lowest running costs overall
• View all electric vehicles

Choose a Hybrid if you…

• Can’t always charge at home
  
• Do a mix of short and long journeys
  
• Want flexibility without range anxiety
• Only pay 1.5p/mile tax from 2028 (half the EV rate)
• View all hybrid vehicles

Choose Petrol or Diesel if you…

• Would rely on public charging (costs 16–24p/mile vs 5p at home)
  
• Drive less than 5,000 miles per year
  
• Primarily do long-distance motorway driving
  
• Want no pay-per-mile tax (only fuel duty
• View all petrol or diesel cars

Important: Public charging costs 16–24p/mile vs 5p/mile at home. If you can’t charge at home, an EV may cost more than petrol.


*Assumptions & Disclaimer

The figures in this table are based on a £20,000 used vehicle covering 10,000 miles per year, reflecting typical UK driving patterns. Fuel and charging costs assume current average prices: petrol at £1.38/litre achieving 40mpg (~14p/mile), diesel at £1.40/litre achieving 50mpg (~12p/mile), and electric vehicles charged at home using a standard electricity tariff of approximately 25p/kWh with efficiency of 4 miles/kWh (~5-7p/mile). Road tax (VED) is calculated at the current standard rate of £195/year for all fuel types. The pay-per-mile charges from April 2028 reflect rates announced in the UK Autumn Budget 2025: 3p/mile for pure electric vehicles and 1.5p/mile for plug-in hybrids, which will be collected alongside VED. Service and maintenance estimates reflect industry averages, with EVs typically costing less due to fewer moving parts and no oil changes. Actual costs will vary based on your specific vehicle's efficiency, local energy and fuel prices, driving style, and charging habits. If you rely primarily on public charging rather than home charging, EV running costs could be significantly higher (16-24p/mile). All figures are estimates for illustrative purposes only and are subject to change following government consultation on pay-per-mile implementation. Data sourced from UK Autumn Budget 2025, OBR forecasts, and industry averages as of November 2025.