Well, another Budget is in the books. And there’s a lot to cover for car owners, car drivers and anyone looking to buy a car over the next few years.
The UK chancellor, Rachel Reeves, announced a raft of new measures that seemed to alternate between good and bad news for consumers, depending on what sort of car you have and how much driving you do. We’ve listed all of the main topics below, but there was certainly a lot of giving with one hand while taking with the other…
1. EVs to be hit with a pay-per-mile tax
As had been widely leaked and trailed in recent weeks, the biggest news was that EV owners will have to pay a new levy of 3p per mile from April 2028. The current average annual mileage for EVs in the UK is about 8,000 miles/year, so that will add an extra £240/year to the cost of driving an EV.
At this stage, the government doesn’t actually know how it’s going to implement this new tax, and the industry has already raised numerous issues with the expectation that owners will have to self-report their annual mileage and pay their extra tax on top of their road tax each year.
Although this tax (known as eVED, or electric vehicle excise duty) won’t commence until 2028, it will effectively hit sales of both new and used EVs immediately. Some companies, like Ford, have already complained that new EV sales have already been affected since this wacky idea was first leaked to the media about a month ago.
We’ll have to wait to find out exactly how the government plans to enforce this new tax, especially since it says that mileage will be recorded each year as part of your MOT test – except that new cars don’t have an MOT test until after they’re three years old. Apparently, the government will expect you to go to an MOT centre to have your mileage checked anyway, even though you don’t need the MOT inspection…
All in all, nowhere near enough thought has gone into this idea. Mileage-based taxation is not inherently bad (we basically have this already with fuel duty, since more than half of the cost of every litre of petrol and diesel is tax anyway), but it would have been better if the government had put some thought into the plan before announcing it.
2. Fuel duty increase is cancelled again
Good news if you drive a petrol, diesel or hybrid car – the chancellor has cancelled the scheduled annual increase in fuel duty for another year.
This is the 15th year in a row that successive chancellors have cancelled the scheduled inflationary increase in fuel duty, which really makes you wonder why they don’t bin the whole schedule altogether. The answer is that it’s simply performative political bullshit, with each chancellor doing his/her best to appear heroic by cancelling the scheduled – but highly unpopular – tax increase.
At a time when the government is regulating that a growing number of new cars must be EVs, it is counter-productive to be increasing the cost of driving an EV by hundreds of pounds a year while freezing the costs of driving a fossil-fuel car.
3. Luxury car tax threshold finally raised
One piece of welcome news is that the government has finally got around to increasing the Expensive Car Supplement, which forces buyers of cars that cost more than £40,000 to pay an extra £425 in road tax per year for five years.
The supplement was introduced in 2017 as a tax raid on luxury vehicles, but the price of cars has increased so much over the last eight years that the £40,000 threshold now catches many very ordinary family cars, none of which could remotely be considered luxurious. And because EVs still tend to be more expensive than petrol cars, a disproportionately high number of EVs were falling foul of this tax.
Successive chancellors have ignored this for years, but the current one has finally decided to increase the threshold to something more realistic. As of April 2026, this threshold will increase to £50,000. While that’s good news in general, it does mean that no-one’s going to want to buy a car priced from £40K to £50K before April, as it will effectively get £2.1K cheaper then. A better idea would have been to backdate it to last April, forgoing some tax revenue but ensuring new car sales keep on rolling rather than stalling.
Conversely, if you’re looking at a new car that’s currently priced just under the £40K threshold, you’ll want to buy it before April. A number of car companies have been reducing prices, particularly for EVs, to keep them under the threshold, and they’ll almost immediately put prices up by a few thousand in April once the threshold moves.
4. Employee Car Ownership Scheme stays – for now
One of the mooted plans for the Budget was the proposed cancellation of the Employee Car Ownership Scheme (ECOS), which allows employees to buy cars at a discounted price, rather than their employer providing them with a company car. It saves employers a lot of tax and works well for employees – but the government misses out on potential tax revenue.
The car industry had howled loudly at the idea of this scheme being cancelled. Not only is it responsible for a lot of new car sales, but it feeds those cars into the used car market after a couple of years, providing a lot of near-new stock for car dealers.
The chancellor announced that plans to abandon the scheme had been deferred, so in essence the can has just been kicked a couple of years down the road.
5. Motability changes
The UK’s Motability scheme is an important part of helping people with disabilities to retain their independence. But there has been a growing concern that the scheme is out of control, with about 20% of all new car sales being Motability sales. For a taxpayer-funded disability scheme, this is simply ridiculous.
On top of that, the sort of cars that eligible customers can choose are often far posher than the average working household could ever hope to afford. The government has responded by kicking ‘luxury’ car brands like Alfa Romeo, Audi, BMW and Mercedes-Benz out of the scheme. Although, curiously, Volvo and Polestar are still included, so presumably the government doesn’t consider them to be luxury brands…
This news apparently came out of the blue, with the affected brands not given any advance warning. Understandably, they’re rather annoyed since they have ordered thousands of cars to supply to Motabliity that they now won’t be able to sell. While it’s hard to argue that a taxpayer-funded scheme should focus on more mainstream vehicles, there still needs to be due process in applying changes.
Currently, only 7% of Motability vehicles are built in the UK, which is scandalous for a scheme that we all pay for. The government says that it wants this to increase to 25% by 2030, but that’s still not good enough. There are plenty of UK-built cars at sensible prices that could be used for Motability – Nissan Qashqai/Juke/Leaf, Mini Cooper, Toyota Corolla hatch and estate, and Vauxhall/Peugeot/Citroën van-based electric people carriers. Imported cars should only be allowed when none of these options fit the bill.
6. Electric car grant extended
The chancellor announced that the taxpayer-funded discounts for many new EVs under £37,000 will continue once the current budget allocation has been exhausted, with a further £1.3 billion allocated.
While the car companies will be delighted (except the Chinese brands, which are not eligible), this doesn’t help lower-income households switch from fossil-fuel cars to EVs, as they still won’t be able to afford a new car. What’s desperately needed is a grant for used EVs, not new cars, preferably attached to a scrappage scheme that helps to get people out of old petrol or diesel bangers and into a newer, but still used, EV.
A real missed opportunity that represents a victory for lobbyists over taxpayers.
7. More money for EV public charging points
Another welcome announcement was an extra £200 million for more public charging points. We don’t have any detail yet, but hopefully this will help get more charging points into regional locations that are currently underserved in charging infrastructure.
What was very much missing from the Budget was any kind of help to reduce the cost of public charging, whether by price caps or VAT reductions as have long been called for. The government seems content to punish those who don’t have the ability to charge in a driveway or garage at home, which is inevitably going to affect people on lower incomes.
Too much whack-a-mole politics, not enough strategy
The sum total of all this is a bewildering mix of giving and taking without any overall strategy in sight, especially for electric cars – which the government is pushing people to buy through ever-increasing mandated registration targets.
Hitting EV owners with an extra £240/year (on average) to drive their cars – a number which will inevitably increase over the years as 3p/mile becomes 4p/mile, then 5p/mile and eventually 10p/mile and so on – will quickly outweigh government discounts on new EVs. Plus, it hits all EV owners, not just those who can afford a new car.
Temporary actions to delay expected cost increases (fuel duty, ECOS) being presented as massive favours to motorists are, frankly, insulting our intelligence. Sadly, most of the national news media lacks the enthusiasm or understanding to properly tackle the chancellor on these decisions.
There is some good news in the Budget (more public EV charging, more money for the EV grant), but it’s mostly just appeasing whichever lobbyists shout the loudest, rather than properly implementing a long-term strategy for the future of motoring in the UK.
