7:33 am, December 5, 2025
The pay-by-mile tax on plug-in hybrid cars has been slammed as ‘unhelpful’ and could ‘dampen demand’ for the car type, just as carmakers are ramping up sales in the UK.
Alongside the confirmation last week that from April 2028 electric car owners will have to pay 3p a mile to drive their cars, in her Autumn Budget speech chancellor Rachel Reeves revealed owners of plug-in hybrids (PHEVs) will also be whacked with the pay-by-mile tax through the proposed new eVED (electric vehicle excise duty).
PHEV owners will be charged 1.5p per by mile to drive their cars – half the amount pure-electric car drivers will pay, but PHEV drivers now face being double-taxed.
Due to PHEVs being powered by both an engine and an electric motor, drivers will have to fork out for the pay-by-mile tax in addition to fuel duty.
The announcement comes as manufacturers begin adding more plug-in hybrids to their model ranges, particularly new Chinese entrant brands like BYD.
Over 208,000 PHEVs have been sold in UK to the end of November, a near-35% increase on the same period last year, according to figures from the Society of Motor Manufacturers and Traders (SMMT). PHEVs now have an 11.1% share of the 2025 UK car market.
Industry experts have now told Car Dealer that the move towards eVED risks dampening demand for PHEVs.
In the wake of the Budget, electric car website Electrifying.com analysed the effect the pay-by-mile taxes will have on EVs and PHEVs compared to a conventional petrol car.
Using Volkswagens as examples and taking into account the eVED, it found an ID.3 58kWh is cheaper to run than a petrol Golf 1.5 TSI, especially on cheap overnight tariffs.
But, with plug-in hybrids, and using the Golf GTE, as an example, the ownership case has become harder.
While PHEVs are cheaper to run and own than a petrol car if charged at home on a cheap energy tariff, pure-electrics are even cheaper despite the 3p-per-mile eVED.
‘Unhelpful’
Speaking to Car Dealer, Cox Automotive’s insight director, Philip Nothard, said the timings of the eVED announcement felt ‘particularly unhelpful’, especially considering the continued rise in popularity of PHEVs.
‘There is a clear risk that this policy will dampen demand for PHEVs,’ he said. ‘The introduction of a per-mile charge will increase operating costs for PHEV users. Layering this tax on top of the existing Vehicle Excise Duty and the increasing fuel duty reduces the financial advantage that PHEVs currently hold over internal combustion vehicles.’
Nothard added: ‘To rebuild confidence among consumers and safeguard PHEV growth, it will be crucial that mileage reporting and the associated tax processes are simple, transparent and clearly defined well in advance of these changes coming into effect.’
Used car marketplace Motors echoed Nothard’s view that the timing was unhelpful, adding that the move would cause confusion among drivers.
‘Consumer confidence in the run-up to the Budget was already delicate and we know from the research we commissioned immediately afterwards that car buyers are reviewing any plans with 30% saying they may postpone purchases,’ the firm’s marketing director, Lucy Tugby, told Car Dealer
‘Even though the introduction of pay-per-mile eVED on PHEVs will not happen until April 2028, its announcement has introduced unwelcome confusion and uncertainty among buyers which could result in them delaying their next car purchase or reverting to petrol or diesel models.’
Auto Trader, meanwhile, disputes the view that eVED will dent sales of PHEVs, but agreed the announcement was mistimed.
The company’s head of strategy and insights, Marc Palmer, said: ‘Based on an average annual mileage of 8,000 miles, most PHEV drivers realistically won’t pay more than an additional £10 a month – an amount unlikely to crush demand for a fuel type that suits many.
‘With the eVED being significantly cheaper per mile than fuel duty, we may see driving habits change as owners are incentivised to run off the battery – which also brings added environmental benefits.’
He added: ‘Although we anticipate a limited impact on PHEVS, in the broader context of the government’s electric ambitions, it seems premature to introduce measures that could reduce the savings BEVs currently enjoy over ICE.
‘Anything that comes across as stick rather than carrot in the transition is deeply unhelpful.’
Motors’ Lucy Tugby had some advice for dealers in the aftermath of the Budget, saying: ‘The challenge facing dealers is to cut through the noise and work with customers to match them to the vehicles with the fuel type best suited to their needs and affordability, whether that be PHEVs, EVs, hybrids, or petrol and diesel models.’
