Autumn Budget 2025: What it means for motorists

A mileage-based charge for electric and plug-in hybrid car drivers from 2028 and a short-term freeze in fuel duty are among the key changes announced in the Autumn Budget 2025.

We’ve broken down the most important announcements from the Chancellor Rachel Reeves from the perspective of car owners and motorists in our Budget guide: 

Mileage-based EV tax

Electric car drivers will be subject to a “mileage-based charge” on battery electric and plug-in hybrid cars from April 2028.

In a document released by the Office for Budget Responsibility (OBR) prior to the Budget announcement, the mileage-based charge will equal £0.03 (three pence) per mile for battery electric cars and £0.015 (1.5 pence) per mile between the 2028 and 2029 financial year.

The OBR estimates that an electric car driver travelling 8,500 miles during this period will pay an additional £255 from the mileage-based charge – said to be roughly the equivalent of half the rate of fuel duty tax paid by petrol and diesel drivers.

The mileage-based charge is forecast to raise £1.1 billion in tax income for the Treasury in the first year, rising to £1.9 billion in 2030.

The OBR reckons that this move will reduce demand for EVs, estimating that around 440,000 fewer electric vehicles will be sold in the five-year forecast period as a result of the changes. However, measures to incentivize EVs will offset this figure by 130,000, according to the OBR.  

In April this year, electric car owners were forced to pay EV road tax for the first time, with zero-emission vehicles previously exempt from Vehicle Excise Duty (VED).

Fuel Duty freeze

The Chancellor has confirmed that fuel duty will remain frozen, but only until September 2026.

After this point, the five pence cut first brought in back in 2022 will be reversed in a “staggered approach”. From April 2027, fuel duty will be increased in line with the Retail Prices Index (RPI).

Fuel duty has been frozen for 16 consecutive years, which the OBR estimates will have cost the Government £120 billion in lost income.

RAC head of policy Simon Williams said: “Drivers will be relieved the Chancellor has decided to keep the 5p duty cut in place for now as it saves them more than £3 a tank. But this relief will be very short-lived given the staggered increase from next September. 

“Without the discount, drivers would still be paying more for a litre of petrol than they were prior to Russia’s invasion of Ukraine in February 2022 which sent pump prices rocketing to record levels. 

“The introduction of the long-awaited Fuel Finder in early 2026 will also be a big moment – for the first time, all petrol stations will need to report their prices allowing customers to find the cheapest fuel wherever they are.”

‘Luxury Car Tax’ threshold increase

In an effort to mitigate the new mileage-based charge for EVs, the Chancellor is increasing incentives to purchase electric vehicles.

The headline in this is a change to the Expensive Car Supplement (ECS), also known as the ‘Luxury Car Tax’, exclusively for electric cars.

From April 2026, the list price threshold at which electric cars are subject to the tax increases from £40,000 to £50,000, meaning a lot more buyers of new EVs can avoid the charge.

The Expensive Car Supplement currently applies to all cars with a list price in excess of £40,000. Applying from the second year the car is first registered, it adds an extra £425 per year on top of the standard rate for five years.

The lower £40,000 barrier will continue to apply to all petrol, diesel and hybrid models, however.

The UK's Electric Car Grant, which gives discounts of up to £3,750 off the list price of eligible EVs, has received £300 million in additional funding to allow it to continue until 2029/30.