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Energy giant Octopus Energy has announced it will pay the pay-per-mile tax for all of its existing customers on an EV tariff which could be worth an average of £240 a year.

Labour announced a new 3p-per-mile road tax, officially called the Electric Vehicle Excise Duty, in the latest Budget in November.

There, it said that EV drivers would need to pay the new charges based on their annual mileage as more and more drivers make the switch away from petrol and diesel, which is causing the government's fuel duty income to drop.

Today (Thursday, December 17), Octopus announced it will pay for the EV road tax for all its existing customers.

Those currently on an Octopus EV lease 'who completed an order by November 28' will be 'fully protected' from the new tax until the end of their lease, which will boost an estimated 20,000 drivers.

Gurjeet Grewal, CEO of Octopus Electric Vehicles, said: "EV drivers should contribute to road upkeep, but fairly and at the right time. Until the details are finalised, we want our existing customers to know they won't be affected.

"They made the switch early, and we're rewarding that commitment by absorbing the new tax and keeping their costs steady."

Octopus EV, the largest EV-only leasing company in the UK, also confirmed it is closely monitoring the government's consultation process on how the tax will work in practice.

Mr Grewal added: "Our customers shouldn't have to wade through new forms or fiddle with extra mileage reports.

"If there's admin to be done, we'll make it as easy as possible. We'll be contributing to the government's consultations on their new tax rules to help ensure they're fair and easy for drivers to navigate.

"The government has sent a clear signal that EVs remain a UK priority. Extending the Electric Car Grant and investing further in public charging will give drivers the confidence to make the switch. As momentum stalls elsewhere in Europe, the UK now has a real opportunity to lead the way on cheaper, cleaner driving."

Under new plans, EV drivers will be made to pay an extra 3p-per-mile road tax charge from April 2028.

The new tax has been named electric vehicle excise duty (eVED) and is to be paid each year alongside the existing vehicle excise duty (VED).

The rate will increase annually in line with the CPI measure of inflation.

The Treasury said in April 2028, an average EV driver will pay about £240 per year.

It added that the tax paid by EV drivers will be "around half the fuel duty rate paid by the average petrol/diesel driver".

A Treasury consultation document revealed that for eVED, drivers of electric cars will be required to estimate their mileage for the year and either pay upfront or spread their payment across the year.

This will happen when they pay VED.

Drivers will submit their actual mileage at the end of the year, and either make an extra payment or receive a credit for future use as required.

Motorists will have their mileage checked annually and this will be during their MOT for most cars.

But as new cars do not have an MOT until they are three years old, they will be checked at about the first and second year anniversary of their registration.