Why Taxing UK EVs in 2028 Is a Step Backward

Most countries that are serious about climate targets are still adding EV incentives. The UK just confirmed it will do the opposite: from 2028, electric vehicles will start paying standard road tax (Vehicle Excise Duty).

This matters because road transport is one of the UK’s biggest sources of CO₂, and EV adoption is finally moving from early adopters to the mainstream. Adding a new cost right as the mass market is making up its mind isn’t smart climate policy, it’s a political compromise dressed up as “fairness.”

In this Green Technology series, we’ve been looking at how clean tech and AI can accelerate a low‑carbon future. Policy decisions like this are the hidden levers that either speed that transition up—or quietly slow it down.

What the UK EV road tax change actually means

The short version: from 2028, electric vehicles in the UK will no longer be exempt from Vehicle Excise Duty (VED). They’ll be taxed much like petrol and diesel cars.

Right now, EVs enjoy:

• Zero VED for most models
• Lower company car tax (Benefit‑in‑Kind), which has been a huge driver of corporate EV fleets

Removing the VED exemption looks small on paper—typically a few hundred pounds a year—but it lands at the exact moment the EV market is trying to win over cost‑sensitive, late‑majority buyers.

Here’s the thing about taxes on EVs: they’re not just numbers on a spreadsheet. They’re signals. When a government moves from incentives to new taxes while EVs are still under 20–30% of the fleet, the signal to consumers and businesses is, “We’re done helping. You’re on your own now.”

For a technology that still depends on scale, infrastructure, and learning curves, that’s premature.

Why early EV incentives work (and why timing matters)

Early incentives aren’t a political favor to EV buyers. They’re a bridge across what economists call the adoption valley—that awkward middle period when a cleaner technology is clearly better in the long run, but still more expensive or less convenient in the short run.

EVs follow a predictable cost curve

Globally, battery prices have fallen by roughly 80–90% since 2010, and every doubling of production volume has historically cut battery costs by around 15–20%. That’s the classic learning curve for new tech.

To keep that curve going, you want:

• High volumes (more EVs sold)
• Stable demand (so factories can invest with confidence)
• Supportive policy (so early buyers aren’t punished)

Pull away support too early and you slow this feedback loop:

More EV demand → more factories and competition → lower prices → more EV demand.

The UK’s 2028 tax shift risks freezing some buyers on the fence:

• Households that were just convinced an EV pencilled out over 5–8 years now have to re‑run the maths.
• Fleet managers optimizing total cost of ownership suddenly see a line item they thought was zero.

“But EVs should pay their fair share”

You’ll hear this argument a lot, and on the surface it sounds reasonable. Roads need funding. Fuel duty revenue will fall as cars electrify. Everyone should contribute.

The problem isn’t the idea of EVs paying something. The problem is when and how.

If you:

• Start charging EV road tax while petrol and diesel are still dominant, and
• Don’t offer clear, long‑term compensating benefits (like cheaper charging, stronger purchase support, or congestion perks),

…you slow the very transition that will eventually save infrastructure and healthcare costs.

Short-term “fairness” ends up locking in long-term costs: higher air pollution, more imported fossil fuels, and a slower path to net zero.

The climate and air quality stakes for the UK

Transport accounts for roughly a quarter of UK greenhouse gas emissions, with road traffic the biggest chunk. If the UK misses its transport decarbonisation targets, it misses its climate targets—simple as that.

Electric vehicles are one of the few technologies ready today to cut emissions from cars and light vans. They’re not perfect, and they’re only as clean as the electricity grid, but they:

• Eliminate tailpipe CO₂
• Slash local air pollutants like NOx and particulates
• Get cleaner over time as the grid adds more renewables

So what happens if policies knock confidence in EVs right now?

• Delayed fleet turnover: Drivers keep older, dirtier cars longer.
• Slower second‑hand EV market: Fewer new EVs sold now means fewer affordable used EVs later, keeping lower‑income households stuck with combustion cars.
• Weaker infrastructure investment: Charging networks, grid upgrades, and software platforms depend on growth forecasts. Policy uncertainty makes those forecasts fuzzier.

For a country that’s pitched itself as a green technology leader, this is a strange moment to introduce friction.

The economics: why a few hundred pounds still matter

On paper, a standard VED charge doesn’t look like a big deal. But buying decisions for cars—especially in a cost‑of‑living crunch—aren’t made on spreadsheets alone.

How buyers actually think

Most households think in terms of upfront price + a rough annual running cost. They don’t run net present value models on fuel savings over 8–10 years.

So you get scenarios like:

• A new petrol car is £2,000 cheaper than an equivalent EV.
• The EV would save, say, £600–£900 per year in fuel and maintenance.
• But now it also has a new annual VED bill, narrowing the perceived advantage.

Economically, the EV might still win over its lifetime. Psychologically, that extra tax line item pushes some buyers back toward what they know.

Fleets and business buyers feel this too

Corporate and public sector fleets often drive early EV adoption. They’re more rational and data‑driven, but they also:

• Work with fixed budgets and procurement rules
• Need predictable policy over 5–10 year cycles

When government shifts the rules mid‑transition—first pushing companies toward EVs with incentives, then clawing some of that back—it creates policy risk. The rational response is to be more cautious with future EV commitments.

That’s the opposite of what you want if your national strategy is to build a strong domestic EV market and attract green technology investment.

A smarter approach: how to phase EV road tax without slowing adoption

There is a coherent way to bring EVs into the tax base without wrecking momentum. It needs three ingredients: timing, transparency, and targeting.

1. Link road tax to milestones, not dates

Instead of saying “EVs will pay full VED from 2028,” a smarter design would be:

• “EVs will start to pay a small share of VED once they reach 40–50% of new car sales,” and
• “They’ll move to full parity once they hit a certain share of the total fleet.”

This ties taxation to actual adoption, not an arbitrary calendar date. The market gets a clear signal: grow fast, reach scale, then join the normal tax system.

2. Keep net incentives positive for a defined period

You can introduce EV VED while still keeping the overall package attractive. For example:

• Modest VED for EVs
• Strong company car tax benefits through the 2030s
• Targeted purchase support for lower‑income households
• Cheaper or priority access parking in urban areas

The principle: until petrol and diesel sales are truly marginal, EVs should be meaningfully cheaper to own over 3–5 years for mainstream buyers.

3. Use smart pricing with data and AI

AI and connected vehicle data can make “road tax” much more intelligent than a flat annual fee.

For example, instead of a blunt VED on EVs, the UK could phase in:

• Distance‑based charging: Pay per mile driven, regardless of powertrain, with lower rates for lighter, more efficient vehicles.
• Location‑sensitive pricing: Higher rates in congested, polluted urban cores; lower in rural areas.
• Time‑of‑use signals: Encourage off‑peak charging that supports grid stability.

Green technology and AI already power dynamic tolling and real‑time congestion pricing in other regions. Extending that thinking to post‑fuel‑duty transport funding is the logical next step.

The benefit: roads stay funded, but the signals you send drivers still reward cleaner, smarter choices.

What this means for businesses working in green technology

If you’re building products or services around EVs, charging, or smart mobility—especially in the UK—this tax change isn’t just a policy footnote. It shapes your market assumptions.

Here are concrete implications:

• Customer education becomes more critical. You’ll need to help households and fleets see total cost of ownership, including fuel savings, maintenance, and any remaining incentives, not just the headline road tax.
• Value‑added software matters more. Tools that optimize charging times, route planning, and energy tariffs can offset the perceived cost hit from new taxes.
• Policy engagement isn’t optional. The most successful clean tech companies I’ve seen stay close to policymakers, respond to consultations, and coordinate with industry groups. Silence tends to favor the status quo.

This is where AI plays a useful supporting role in the green transition:

• Forecasting the impact of policy changes on EV adoption curves
• Optimizing smart charging to minimize both grid impact and bills
• Modelling different taxation scenarios and their equity impacts

If governments are going to reshape how we pay for roads, transport, and emissions, the companies that can quantify those shifts and respond quickly will win.

Where the UK should go from here

The reality? The UK doesn’t need to scrap the idea of EV road tax forever. It needs to reframe and redesign it.

A climate‑aligned approach would:

• Anchor EV taxation to clear adoption milestones, not arbitrary dates
• Maintain a net advantage for EVs vs petrol/diesel until at least the mid‑2030s
• Use AI‑enabled smart pricing instead of flat, blunt charges
• Ring‑fence a meaningful slice of transport revenue for green infrastructure: public transport, active travel, and charging networks

For drivers and businesses, the practical move is to treat the 2020s as the high‑leverage decade: the years when switching to cleaner transport has the biggest climate impact and still enjoys meaningful policy support—despite missteps like this.

If you’re working in green technology, this is the moment to:

• Stress‑test your EV and mobility plans against different policy futures
• Build tools that make owning and operating EVs obviously cheaper and easier
• Stay vocal about what good policy looks like, not just what’s politically convenient

The UK can still be a leader in clean transport. But leadership isn’t just about announcing phase‑out dates. It’s about aligning every tax, subsidy, and regulation with a simple principle:

The cleaner choice should be the cheaper, easier, more obvious choice.

Right now, taxing EVs in 2028 pulls in the opposite direction. There’s still time to fix that.