Fuel Duty vs the Electric Mile: What the Tax on Driving Actually Costs You

Ask most drivers what tax they pay to drive and they will mention the disc, or the lack of one. The bigger levy is hiding in the pump price. Fuel duty is charged per litre, before VAT is added on top, and it has been the Treasury's workhorse motoring tax for decades. For anyone weighing up an electric car against a petrol one, the cleanest way to see the difference is to convert everything to pence per mile. The results are more dramatic than most people expect.

The tax inside a litre of petrol

The numbers first. Fuel duty on unleaded petrol and diesel currently stands at 52.95p per litre, a rate that includes the temporary 5p cut introduced in 2022 and repeatedly extended since, most recently to 31 December 2026. VAT is then charged at 20% on the whole amount, duty included, which adds roughly 10.6p of VAT on the duty alone for every litre sold. The scale of the revenue involved explains why the tax persists: the OBR expects fuel duties to raise £24 billion in 2025-26, equivalent to about £835 per household, and HMRC's outturn figures show receipts of £24.3 billion in the year to March 2026, down around £100 million on the previous year even as pump prices rose.

Converting that to pence per mile

Take a reasonably efficient petrol car averaging 45mpg. That works out at about 9.9 miles per litre, so the 52.95p of duty in each litre translates to roughly 5.4p of duty per mile driven. Add the VAT charged on the duty itself and the tax element alone reaches about 6.4p per mile. That is before a penny of the actual fuel, the retailer's margin, or the VAT on the fuel itself is counted.

For a typical driver covering around 7,100 miles a year, fuel duty alone costs roughly £380 annually, and the VAT on top of it takes the total tax paid per mile comfortably past £450. Every mile, in every year, of ownership.

Now the electric side of the ledger. An electric car charging at home pays fuel duty of exactly nothing. The Energy Saving Trust's figures put the cost of a full 220 miles at about £17 charging at home, versus £53 on public rapid chargers, with a full tank of petrol at around £45. Even at the expensive end, the electricity itself is VAT-rated like any household energy purchase rather than carrying a dedicated per-mile excise duty. The per-mile energy cost works out at roughly 7.7p at home on a standard tariff, often far less on an overnight EV tariff, against about 20.5p for the petrol car's full fuel and tax cost.

The gap that is coming

That gap is the entire fiscal problem of the EV transition in miniature. The OBR has been explicit about it: fuel duty receipts are expected to fall towards zero by 2050 as electric vehicles replace petrol and diesel, and the loss of motoring tax revenue represents the single largest long-term fiscal cost of successful decarbonisation. Every electric car that replaces a petrol one takes roughly £380 to £450 a year of tax out of the system at typical mileage.

The government's answer was announced at Autumn Budget 2025 and confirmed in its consultation response of 13 July 2026: electric Vehicle Excise Duty, or eVED, a mileage charge set at 3p per mile for electric cars from April 2028, and 1.5p per mile for plug-in hybrids, deliberately set at half the equivalent fuel duty rate. We look at the design of that charge and what it means for running costs in our piece on the 3p per mile question.

The comparison, in one line: a petrol driver pays about 6.4p per mile in duty and duty-VAT today; an electric driver will pay 3p per mile from April 2028, and nothing at all before then.

What this means for buyers right now

Three practical takeaways fall out of the arithmetic.

First, the tax advantage is real but it narrows in 2028. Anyone buying a car now has a window of roughly 20 months where the electric mile carries no usage tax at all, followed by a period where it carries about half the tax of the petrol mile. On 7,100 miles a year, eVED will cost about £213 annually from April 2028, against the £380-plus a comparable petrol driver pays in duty alone. The electric mile stays cheaper on tax, just less dramatically so.

Second, where you charge matters more than the tax treatment. The difference between home charging and public rapid charging is worth more per mile than the entire fuel duty levy. A driver who cannot charge at home and relies on rapid chargers pays closer to petrol money for their energy, tax advantage or not. The wallbox decision, which we cover in our guide to home chargers, does more for running costs than any tax planning.

Third, watch the duty rate itself. The current 52.95p rate runs to 31 December 2026, with legislated steps returning it to 57.95p by March 2027, though chancellors have cancelled such rises for 15 years running and the Commons Library notes the OBR has cost the cumulative freezes at around £120 billion since 2011. Each penny of duty adds about 0.1p per mile to the petrol side of the ledger, so the gap between the two fuels moves with every Budget.

The honest read

The fuel duty versus electric mile comparison is not a trick or a subsidy loophole, it is a tax system mid-transition. Petrol and diesel have carried the cost of the roads for a century; electricity has not yet started. The government has now published its plan to close that gap gradually, at a rate deliberately kept below the fuel equivalent. For drivers, the sensible conclusion is neither triumphalism nor alarm: the electric mile is taxed lightly today, will be taxed at half the petrol rate from 2028, and in both cases remains cheaper per mile than fuel, provided you charge where it is cheap.