In the UK, as in many other countries, the shift towards electric vehicles (EVs) has been rapid. Incentives, increased choice and some positive PR took the electric car sales to nearly 500,000 vehicles in 2025 - around 24% of the market. But the government's budget in late November, which outlined new charges for EV owners, may have slammed the brakes on this momentum.
Authors
- Jagannadha Pawan Tamvada
Professor of Entrepreneurship, Kingston University
- Mili Shrivastava
Principal Academic in Strategy, Bournemouth University
Chancellor Rachel Reeves revealed that EV owners will face a new 3p-per-mile road charge from April 2028, marking a significant shift in how the government taxes cleaner forms of transport. The owners of plug-in hybrids will pay 1.5p per mile. These new levies will apply alongside other motoring taxes that EVs are also now required to pay.
This is the UK's first major step towards replacing declining fuel-duty revenues , which have fallen as more drivers move from petrol and diesel vehicles to electric alternatives. The pay-per-mile tax is expected to raise more than £1 billion in its first full year.
These charges don't mean that the government is cooling on EVs, however. Some sweeteners still remain. An electric car grant (ECG), launched in July 2025, offers up to £3,750 off eligible new electric vehicles and is aimed at keeping the transition to cleaner transport affordable for consumers.
But critics argue that introducing running-cost charges risk slowing EV uptake at a time when the government is still trying to accelerate the shift away from fossil-fuel vehicles.
And industry experts are warning that discounts of up to £11,000 per vehicle offered by carmakers to boost demand are not sustainable. At the same time, industry groups warn that higher operating costs could also reduce demand , particularly for price-sensitive customers.
The shift signals a maturing phase for the UK's EV market: incentives remain, but the era of untaxed electric motoring is drawing to a close. So what could it mean for sales - and is it a good time for drivers to make the change? Here's what 2026 might have in store for the EV market.
1. Prospective buyers are likely to hold back
The demand for EVs is likely to be affected in the short run. Forecasts from the independent Office for Budget Responsibility (OBR) suggest that nearly 440,000 fewer EVs will be sold by 2031 because of the new charge. However, 320,000 of these are expected to be offset by increased sales due to other measures in the budget (an increase to the threshold for the "luxury car tax" for EVs, for instance, and widening the electric car grant ).
To put that into perspective, nearly 1.95 million new cars were sold in 2024 in the UK. Battery-powered EVs accounted for one in five of these new sales and, together with plug-in hybrid electric vehicles (PHEVs), they exceeded 40% of the market share. The secondhand market is likely to feel the impact as well: with overall ownership costs rising, demand for used EVs may weaken alongside new-car sales.
2. Less confidence in EV ownership costs
Prospective buyers are likely to scrutinise the long-term costs of EV ownership, as the new system introduces more uncertainty. There will inevitably be questions: what happens if the per-mile charge increases from 3p to 4p, or if inflation pushes these rates higher? This unpredictability around future running costs could dampen consumer confidence, particularly among buyers who are already cautious about making the switch to a still-evolving technology.
3. Car producers will find it challenging
Carmakers are also likely to face challenges. The automotive industry is already investing heavily in factories, tooling and technology to support the shift to electric production.
Several manufacturers, including Jaguar , are planning to phase out internal combustion engines entirely. A sudden change in the policy environment could complicate these long-term commitments.
Some companies may scale back or delay investment in EV technologies if they anticipate weaker consumer demand, while others might double down - accelerating production, lowering costs through building more cars, and innovating more aggressively to keep electric models attractive despite the new charges their customers will face.
BMW, for example, is expected to introduce several new EV models over the next two years, with its new iX3 travelling more than 1,000 kilometres (621 miles) on a single charge recently. The leaders of Polestar and Volvo have no intentions of slowing down either as they strive to hold on to market share in the face of Chinese competition.
4. Commuters will feel most penalised
Commuters are likely to feel the greatest impact. For many people, lower living costs are a key reason for living outside major cities, and long daily journeys make fuel efficiency a central consideration. Drivers who planned to switch to EVs to reduce commuting costs may now feel penalised for living further from their workplaces. Every extra mile will add to their running costs under the new system.
5. Impact on other sustainability initiatives
The new charge also highlights a broader reality: sustainability subsidies are rarely permanent. The closure of the feed-in tariff scheme for solar power in 2019 is a recent example. But although there were warnings against its removal , solar adoption actually continued to rise . A similar dynamic could play out in other areas of clean technology.
6. EV prices are likely to go down
There is a potential silver lining for buyers - the pay-per-mile policy could indirectly bring down EV prices. With projected demand dropping, manufacturers may feel pressure to reduce margins to attract customers. Some Chinese carmakers operating in the UK have already introduced additional incentives to offset the impact of the new charges. This could signal that competitive pricing strategies will intensify in response to the policy.
The risk of the new charge is that it creates the impression that sustainability incentives are not only being withdrawn but replaced with new costs for drivers switching to cleaner vehicles. This may make petrol cars seem like a lower-risk option for would-be EV buyers. But over time, falling EV prices, improved battery efficiency and lower operating costs compared with traditional vehicles are still expected to make the transition economically compelling.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
