EV drivers face 2028 pay-per-mile countdown despite fuel duty freeze, say leasing specialists

by Kevin Borras

In last week’s Autumn Budget, Chancellor John Healey extended the 5p fuel duty cut until July 2027, keeping duty at 52.95p a litre for petrol and diesel, while the 3p-a-mile tax on EVs stays on track for April 2028.

Data from car leasing specialists Hippo Leasing gives a clear picture of what it means for drivers, the company says.. The average business EV lease it arranges covers 10,578 miles a year, so the pay-per-mile charge works out at around £317 a year, or £26 a month on top of a typical £499 payment. Over the same distance, a 45mpg petrol car pays around £566 in fuel duty before VAT, so electric drivers pay just a little over half as much.

Surveys conducted ahead of the budget suggested drivers were holding off, but that isn’t reflected in Hippo’s own figures. Enquiries in the first three weeks of October ran 7% ahead of last October, and they’re up 13% on 2025 so far this year.

Tom Preston, Chief Executive Officer at Hippo Leasing, has shared his immediate reaction to the budget and what it means for motorists:

“Extending the fuel duty cut is welcome and will give petrol and diesel drivers short-term relief at a time when they’re already struggling with higher household costs,” he says.

“Customers who gave us a monthly budget this year said that they could only spend £376 on average. For someone doing 10,000 miles a year in a 45mpg petrol car, the 5p cut is worth around £60 a year. Although the extension only pushes the rise back to next summer.

“The lack of visibility on company car tax after 2030 could be a real headache for fleets. This means anyone deciding between electric and petrol for a three or four-year lease next year will spend the tail end of their contract not knowing what they’ll be paying on tax.

“Meanwhile, the pay-per-mile charge still starts in April 2028, which means anybody taking out an EV lease will have to factor in an extra £25 or so a month. So that’s definitely worth building into your monthly budget from the start. At a time when four in 10 of our finance deals need zero deposit just to keep entry costs manageable, an extra £300 a year in running costs will carry real weight when it’s time to renew.”

(Picture: Peugeot)