Budget backs net-zero: EV pay-per-mile & retrofit funding

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Net Zero News can reveal that Chancellor Rachel Reeves has confirmed in the recent Budget that the Government will introduce an electric vehicle pay-per-mile charge from 2028 and will invest £1.3 billion into the Electric Car Grant as part of a suite of measures designed to support both the transport and energy sectors.

The announcement was made at the Finance Bill presentation in Westminster, where the Chancellor outlined the next phase of vehicle electrification policy. From April 2028, drivers of battery electric vehicles will move from a zero fuel duty model to a distance-based charging regime. Simultaneously, the £1.3 billion injection into the Electric Car Grant will boost purchase incentives and underpin wider infrastructure developments.

Since its launch in 2011, the Electric Car Grant has played a central role in incentivising zero-emission motoring by offering purchasers a discount on eligible electric vehicles. Over the past decade, the scheme has contributed to a six-fold increase in UK EV registrations, but transport remains one of the highest emitting sectors. The shift to a pay-per-mile framework forms part of a broader strategy to internalise the true cost of road use and to maintain revenues traditionally raised through fuel duty, while keeping the emphasis on low-carbon travel.

The UK’s commitment to reach net-zero greenhouse gas emissions by 2050 requires rapid decarbonisation of road transport, which currently accounts for around 21 per cent of total emissions. By introducing a per-mile charge, the Government aims to create a sustainable funding stream for road maintenance and charging infrastructure rollout. The £1.3 billion reinforcement of the Electric Car Grant will be critical in driving early EV uptake and in ensuring that purchase support continues concurrently with the evolving levy structure.

The dual approach is significant for the UK’s net-zero goals because it balances consumer incentives with fiscal sustainability. The enhanced grant is expected to lower upfront costs for thousands of drivers, boosting annual EV sales and reducing tailpipe emissions. Meanwhile, the pay-per-mile charge should secure the long-term viability of road network funding without reverting to increased fuel taxes, catering to a growing fleet of electric vehicles.

HM Treasury will work closely with the Department for Transport to administer the new charging mechanism and to allocate the £1.3 billion grant fund. Collaboration with local transport authorities and private charging operators will be essential to ensure that investment supports the expansion of ultra-rapid and destination charging points, particularly in underserved regions. Net Zero News understands this forms part of a cross-government effort involving the Department for Energy Security and Net Zero to align transport policy with grid resilience objectives.

This announcement builds on the UK’s Transport Decarbonisation Plan and follows the legislation enacted under the Climate Change Act 2008 (as amended) and the Sixth Carbon Budget. It also intersects with the Net Zero Strategy and prevailing frameworks for energy infrastructure, which emphasise the electrification of heat and vehicles alongside enhancements to network capacity.

Communities stand to benefit from reduced local air pollution and from improved access to charging facilities, particularly in urban and peri-urban areas. The automotive industry will need to adapt its business models to incorporate telematics systems capable of tracking mileage and administering charges. However, concerns remain regarding data privacy, equity for low-income households and the readiness of rural charging networks to accommodate increased demand.

The next phase will involve a public consultation on the pay-per-mile design, scheduled for early 2026. Detailed regulations and technology requirements are expected to follow later that year, with the first levy payments commencing in April 2028. In parallel, the Government will draw down the £1.3 billion grant allocation to support ongoing vehicle purchase incentives and infrastructure grants.

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