9:16 am, January 12, 2026
Chancellor Rachel Reeves is reportedly considering ways of cutting electric car charging costs, amid fears within government that the ‘pay-by-mile’ tax will be a hammer-blow to sales of new EVs in 2028.
Whitehall officials are keen to reduce bills for consumers and businesses, with the government exploring ways of cutting network charges at public charging points, reports The Daily Telegraph.
Internal forecasts suggest that a proposed 3p-per-mile levy on electric cars from 2028 would significantly suppress demand.
The charge, designed to replace declining fuel duty receipts, is expected to add around £255 a year to the average EV driver’s costs. Hybrid vehicles would also be affected, facing a 1.5p-per-mile charge under the plans.
The government is understood to be focusing on so-called network charges applied to public charging infrastructure, which have risen sharply in recent years and now make up a significant portion of charging costs.
EV drivers currently have to pay 20% VAT on roadside charging compared to 5% when charging at home, with the Treasury looking at ways of reducing this.
This differential in charging costs has been branded as a ‘pavement tax’ because it disproportionately affects motorists without access to off-street parking.
It’s believed within Whitehall that this disparity risks undermining confidence in EVs.
Officials have held a series of meetings with industry experts and energy specialists in recent weeks to assess how pricing structures could be reformed.
One person familiar with the discussions said there was growing anxiety within the Treasury that the new mileage-based tax could ‘kill EV demand’ unless offsetting measures were introduced.
As reported by The Telegraph, a Whitehall source told the newspaper: ‘The way we convince people to switch to EVs is by showing people it is easy and it is cheap. There are savings to be had here for many people.’
There are even rumours that targeted tax reliefs could ultimately pay for themselves by boosting demand for UK-built electric cars, such as the Nissan Leaf produced in Sunderland.
The considerations come as the car industry heaps more pressure on the government to revise the ZEV Mandate.
This year, 33% of new car sales have to be of zero-emission cars.
Speaking as figures for new car registrations for 2025 were published last week, SMMT chief Mike Hawes said: ‘Rising EV uptake is an undoubted positive, but the pace is still too slow and the cost to industry too high.’
He added: ‘Government has stepped in with the Electric Car Grant, but a new EV tax, additional charges for EV drivers in London and costly public charging send mixed signals.’
