With the introduction of the Government’s planned electric vehicle mileage tax less than 18 months away, fleet operators are warning that significant questions remain unanswered about how the new system will work, raising concerns over administration, payments and company car taxation.
The Association of Fleet Professionals (AFP) believes businesses need greater clarity before the new Electric Vehicle Excise Duty (eVED) comes into force in April 2028.
Although the Government has outlined plans for digital systems to support mileage reporting and tax collection, some of the technology required will not be ready for the scheme’s initial launch.
Digital tools can also help businesses keep track of their vehicle arrangements and access important account information. CVC’s vehicle lease management portal provides an online resource for managing vehicle leasing information.
The Government has also set out specific eVED arrangements for fleet, leasing and rental companies, making it important for businesses to understand how the rules will affect their own operations.
For companies operating electric vehicles, the uncertainty creates practical challenges when planning fleet budgets, managing vehicle changes and calculating the overall cost of running company cars.
The AFP has therefore called for further clarification, warning that fleet operators could face administrative difficulties if the system is introduced before all the necessary arrangements are in place.
The proposed tax has also attracted wider industry criticism, with the British Vehicle Rental and Leasing Association (BVRLA) raising concerns about the Government’s approach to electric vehicle road pricing.
What Is The Government’s Electric Vehicle Mileage Tax?
The proposed electric vehicle mileage tax was announced as part of the Government’s plans to change how vehicle taxation works as more motorists move away from petrol and diesel vehicles.
From April 2028, drivers of fully electric cars are expected to pay an additional 3p per mile, while plug-in hybrid electric vehicles (PHEVs) will face a lower charge of 1.5p per mile. Although the proposed eVED rates discussed here relate to electric cars and plug-in hybrids, businesses are also considering the wider implications of electrification across their commercial fleets.
For a fuller explanation of how the proposed mileage-based system will work, including the planned rates, mileage calculations and implications for motorists, read our guide to electric vehicle pay-per-mile tax and the introduction of eVED in 2028.
Our article on electric van adoption across UK business fleets looks at how businesses are approaching the transition to electric commercial vehicles.
The new mileage-based charge will apply alongside standard Vehicle Excise Duty (VED), meaning electric vehicle owners will have an additional tax to consider.
Under the proposed arrangements, annual mileage will initially be estimated in advance, with payments adjusted to reflect the distance actually travelled. Any overpayment or shortfall will then need to be addressed through a refund or an adjustment to the following year’s calculation.
However, the arrangements for processing refunds are a particular concern, with the automated system not expected to be available until 2030.
For a more detailed explanation of the proposed rates, payment arrangements and how the system is expected to operate, read our guide to electric vehicle pay-per-mile taxation.
Fleet Operators Face Questions Over Mileage Reporting And Payments
The AFP has highlighted several areas where businesses still need clearer guidance, particularly when managing electric vehicles across larger company fleets.
One of the biggest challenges involves employees changing vehicles during the tax year. Fleet managers need to understand how mileage records and outstanding tax liabilities will be handled when a company car is replaced, transferred to another driver or sold. These issues also highlight the importance of planning vehicle changes throughout their working life. The introduction of eVED could also influence how businesses approach vehicle replacement and disposal. Effective fleet lifecycle management helps organisations plan vehicle acquisition, operation and replacement while considering the costs associated with each stage.
Our fleet lifecycle management guide examines the different stages involved in managing business vehicles.
There are also concerns about vehicles being sold before their actual mileage has been reconciled against the original estimate. If a vehicle has travelled further than anticipated, questions remain about who will be responsible for settling any outstanding payment and how this will be calculated.
Other areas requiring clarification include:
- Vehicle replacements: How will mileage estimates and outstanding payments be handled when an employee changes their company car?
- Mileage verification: What evidence will drivers and businesses need to provide to confirm the distance travelled?
- Refunds: How will overpayments be returned before the automated refund system becomes operational?
- Vehicle sales: What happens when an electric car is sold with an outstanding mileage tax liability?
- Fleet administration: How will businesses manage payments and reporting across multiple vehicles and drivers?
The Government has indicated that digital payment facilities will be made available through application programming interfaces (APIs), allowing payments to be made monthly, every six months or annually.
This could simplify the payment process for fleet operators, but it does not necessarily resolve the wider administrative challenges surrounding mileage estimates, vehicle changes and refunds. Businesses already responsible for tracking vehicle records, contracts and driver changes may need to review their existing processes. Our fleet administration and account support explains the type of ongoing support involved in managing business vehicles.
Keeping track of vehicle information and managing the administrative demands of a company fleet can require considerable organisation. CVC provides fleet administration and account support to help businesses manage their vehicle requirements and ongoing account administration.
Managing these responsibilities is part of the wider challenge of running a company vehicle fleet. Our fleet management guide for UK businesses covers the key considerations involved in managing vehicles, drivers, costs and day-to-day fleet operations.
Keeping accurate and accessible information across a fleet can become more difficult when vehicle data is held across different systems. Our article on fragmented fleet data and the costs for businesses looks at the problems this can create for organisations.
Digital records will also be important as companies monitor individual vehicles and their associated contracts. CVC’s vehicle lease management portal provides a central place for customers to access vehicle and lease information.
The AFP has previously raised concerns about the proposed arrangements, including through its electric vehicle taxation manifesto and call for Government action.
Company Car Tax Treatment Raises Further Concerns
Alongside the practical arrangements for collecting eVED, fleet operators also want clarification about how the new charge will interact with existing company car taxation rules.
One particular concern is whether an employer paying the mileage tax associated with an employee’s private journeys could create an additional Benefit-in-Kind (BIK) liability. The timing of vehicle replacement can also affect the costs and administrative responsibilities associated with running a fleet. Our guide to when businesses should replace fleet vehicles examines the factors businesses should consider when deciding whether to retain or replace their vehicles.
There are also questions about whether employees could face overlapping tax charges where private mileage-related eVED payments are made alongside employer-funded electricity benefits. Employers also need to consider how employees are reimbursed when charging company vehicles at home. Our article on home EV charging reimbursement for fleets looks at the arrangements businesses can use.
This is particularly important for businesses providing electric company cars as part of their employee benefits packages.
Businesses purchasing electric company cars should also be aware of changes to capital allowances from April 2027, which will affect the tax relief available on qualifying vehicle purchases. Our article explains the electric company car tax relief changes coming in April 2027.
Company car taxation already involves several considerations, including the vehicle’s list price, CO2 emissions, fuel type and the applicable BIK percentage. Tax treatment is also an important consideration when businesses assess the appeal of second-hand electric company cars. We look at potential developments in HMRC’s approach to company car tax for used electric vehicles.
The Government has confirmed future company car tax percentages through to 2030/31, giving employers some longer-term visibility over the tax treatment of electric company cars. However, the interaction between BIK and the new mileage charge still needs clarification.
Our guide to company car BIK rates and salary sacrifice changes through to 2030/31 provides further information for employers reviewing their company car arrangements.
Businesses operating plug-in hybrids should also consider the existing PHEV company car tax rates for 2026/27, particularly when comparing different vehicle options.
Until the relevant authorities provide more detailed guidance, fleet managers may find it difficult to calculate the complete taxation implications of the proposed eVED arrangements.
Government Technology May Not Be Ready For April 2028
The Government intends to introduce several digital systems to support the new mileage-based tax. These include a connected-car mileage reporting platform, an automated refund facility and a dedicated DVLA platform designed to support fleet operators.
In principle, these systems could make the administration of eVED considerably easier, particularly for businesses managing larger numbers of electric vehicles. However, the AFP is concerned that the necessary technology will not be available when the new tax is introduced.
The absence of an automated refund mechanism until 2030 is a particular issue, as businesses will need to manage any differences between estimated and actual mileage during the initial implementation period.
There are also unanswered questions about how the dedicated fleet platform will operate and whether it will provide a practical solution for companies managing multiple vehicles, drivers and replacement schedules.
For fleet operators, the concern is not simply the additional cost of the mileage tax. It is also the possibility of administrative errors, payment disputes and penalties arising from a system that may not have all its intended features in place at launch.
The Government will therefore need to provide clear instructions covering reporting responsibilities, payment deadlines and how discrepancies will be resolved. Businesses may also need to review their internal policies to make sure employees understand their responsibilities when using company vehicles. Our company vehicle policy guide covers the considerations involved in setting out clear rules for company car and van use.
The AFP has confirmed that it remains in contact with the DVLA and Treasury, but believes further progress is needed before businesses can prepare confidently.
More generally, businesses reviewing how they manage vehicle records, costs and operational responsibilities may find our fleet management guide useful. Effective fleet oversight involves more than choosing vehicles; it also means keeping track of the information and processes needed to manage them throughout their working life.
Could eVED Affect the Used Electric Vehicle Market?
The potential impact on the second-hand electric vehicle market is another concern raised by the AFP.
The used EV market is becoming increasingly important to the wider transition towards electric motoring, providing more affordable options for motorists and businesses that may not be ready to acquire new electric vehicles.
Running costs have been an important consideration in encouraging buyers to make the switch, particularly as petrol and diesel prices fluctuate. However, introducing an additional mileage-based tax could change how prospective buyers assess the financial benefits of electric motoring.
The purchase price of electric vehicles is another factor influencing demand. Our article on electric vehicles becoming cheaper than petrol cars examines how changing vehicle prices could affect the financial case for switching to electric motoring.
Although the proposed rates are relatively modest on a per-mile basis, the additional expense could influence purchasing decisions, particularly when combined with existing VED, insurance, charging costs and other vehicle-related expenses. This is especially relevant for higher-mileage drivers and businesses whose vehicles cover significant distances each year. Businesses reviewing their future vehicle requirements will need to consider how additional taxation could affect their budgets and replacement plans. Our guide to fleet planning and leasing explores the considerations involved in selecting and funding vehicles for business use.
The timing is also important. The introduction of eVED comes as the used electric vehicle market continues to develop, with improving vehicle choice and changing residual values influencing the cost of ownership. Our report on used electric vehicle values increasing by 7.5% explores developments in the second-hand market. The wider move towards electric vehicles is also creating new considerations for businesses planning their fleets. Our guide to overcoming barriers to electric fleet adoption examines some of the practical issues organisations need to consider.
For businesses assessing whether electric vehicles offer a financially viable alternative to petrol and diesel models, it is increasingly important to consider the complete cost of operating a vehicle rather than focusing on the monthly lease payment alone. Fuel prices and day-to-day running costs remain important considerations when comparing vehicle options, as discussed in our article on leasing electric vehicles as fuel prices rise.
Our guide to calculating the total cost of ownership for business vehicles explains the different expenses organisations should consider when making fleet decisions. Businesses can also review wider ways to improve operating costs in our guide to making a business fleet more efficient.
AFP Calls For Electric Vehicle Mileage Tax To Be Delayed Until 2030
The AFP accepts that changes to vehicle taxation will be necessary as the UK moves towards greater electric vehicle adoption and traditional fuel duty revenues decline.
However, the organisation believes the proposed April 2028 introduction leaves insufficient time to resolve the outstanding administrative and technological challenges.
It has called for eVED to be postponed until 2030, arguing that a delay would allow the Government to establish the necessary digital systems, clarify taxation arrangements and give businesses and motorists more time to understand their responsibilities.
The AFP also believes delaying the introduction could help protect the developing used electric vehicle market by avoiding an additional financial consideration at a particularly important stage of its growth.
With the introduction date approaching, fleet operators are looking for greater certainty over how the system will work in practice. Businesses reviewing their vehicle requirements in the meantime may need to factor changing tax arrangements into longer-term decisions about replacement cycles, vehicle selection and funding. Our guide to fleet planning and leasing looks at the considerations involved in planning a business fleet.
The introduction of additional vehicle taxes is another factor businesses may need to consider when deciding whether to retain or replace existing vehicles. Our guide to when businesses should replace fleet vehicles explores the factors that can influence those decisions.
Until the Government provides more detailed guidance, businesses could find it difficult to accurately forecast the financial and administrative implications of the new mileage-based tax.
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