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.
• Self-charging hybrids are NOT affected – vehicles that use petrol or diesel as their sole external source of power (i.e. cannot be plugged in to charge) will not pay the new mileage tax. They continue to pay fuel duty at the pump like petrol and diesel vehicles.
  
• This new tax, officially called "eVED" (Electric Vehicle Excise Duty), 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 8,000 miles per year, the extra charge would work out to roughly £240 per year (around £20 per month).
  
• 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 rate will be uprated annually with CPI inflation from 2029-30 onwards.
• The move aims to "replace" some of the lost income from fuel duty as the UK transitions to electric vehicles – fuel duty revenues are forecast to fall to around £12bn by the 2030s.
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Other supporting & related measures, supporting EV adoption:

• £1.3bn additional funding for the Electric Car Grant (extended to 2029-30).
• £200m additional investment in public charging infrastructure.
• Raising the Expensive Car Supplement threshold from £40,000 to £50,000 for EVs.
• 10-year 100% business rates relief for EV charge points.
• Review of public charging costs to start Q1 2026.

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, electric 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 self-charging hybrid owners

• No change – self-charging hybrids (like Toyota Yaris Hybrid, Honda Jazz Hybrid, Kia Niro Hybrid) are not affected as they cannot be plugged in to charge.
  
• They continue to pay fuel duty at the pump like petrol and diesel vehicles.
  

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 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?

The government consultation has now confirmed how mileage will be tracked:

Self-reported mileage at VED renewal

• Your mileage will be verified at your annual MOT test (as already happens).
  
• You pay upfront based on your estimate (monthly via Direct Debit, or annually).
  
• At the end of the year, you submit your actual mileage for reconciliation.
  
• If you underestimated, you pay the difference; if you overestimated, you get a credit for the following year.

Checked at annual MOT

• When you renew your road tax each year, you'll enter your current odometer reading and estimate your mileage for the year ahead.
  
• For new cars under 3 years old (before they need an MOT), you'll need to attend a mileage check around the first and second registration anniversary at an accredited provider (likely MOT garages).

No trackers or GPS required

• The government has explicitly ruled out mandatory trackers, GPS devices, or telematics.
  
• There will be no requirement to report where or when miles are driven.
• Privacy is protected – only total mileage is recorded.
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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.
  
• Plug in 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 plug in 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 Plug-in Hybrid (PHEV) 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 plug-in hybrid vehicles

Choose a Self-Charging Hybrid if you…

• Want better fuel efficiency than petrol/diesel without plugging in
  
• Don't have access to home charging
  
• Want to avoid the new pay-per-mile tax entirely
• Do mostly urban/suburban driving where regenerative braking helps
• View all self-charging hybrid vehicles

Choose a Petrol or Diesel…

• 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 vehicles

⚠️ 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. The rate will be uprated annually in line with CPI inflation from 2029-30 onwards. Self-charging hybrids (vehicles that cannot be plugged in to charge) are not subject to eVED and are not shown separately in the table – they pay fuel duty at the pump like petrol and diesel vehicles. 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. The consultation closes on 18 March 2026. Data sourced from UK Autumn Budget 2025, HM Treasury eVED Consultation (November 2025), OBR forecasts, and industry averages as of November 2025.