There are some changes coming in for drivers
The Chancellor has unveiled a series of changes impacting UK drivers as part of her Autumn Budget. Rachel Reeves revealed her spending plans on Wednesday lunchtime, which include measures such as a freeze on income tax thresholds, scrapping the two-child benefit cap, a new ‘mansion tax’, and alterations to ISA savings limits.
These tax increases are in response to downgraded economic forecasts and increased welfare spending due to the abolition of the two-child benefit cap and the Labour revolt over attempts to curb the benefits bill. The Chancellor also announced spending changes that will affect drivers. These include a mileage-based charge for electric and plug-in hybrid car drivers and a temporary freeze in fuel duty.
In an unprecedented error, full details of Ms Reeves’s plans were published by the OBR more than half an hour before she addressed the Commons chamber. The budget watchdog predicted that gross domestic product would grow by 1.5 per cent this year, an increase from its earlier 1 per cent forecast, reports the Manchester Evening News.
Here is everything you need to know about the proposed changes for drivers.
Changes to Mileage-based EV tax and expensive car supplement
From April 2028, electric vehicles will be subject to a new ‘mileage tax’ to compensate for the lack of fuel duty paid for these vehicles. EV drivers will be charged an equivalent of 3p per mile for battery electric cars and £0.015p per mile for plug-in hybrid cars. Ms Reeves stated that this will contribute towards road maintenance.
She informed the Commons: “I will ensure that drivers are taxed according to how much they drive and not just the type of car they own by introducing electric vehicle excise duty on electric cars.
“This will be payable each year alongside vehicle excise duty at 3p per mile for electric cars and 1.5p for plug-in hybrids, helping us to double road maintenance funding in England over the course of this Parliament.”
The new levy is projected to generate £1.4 billion in 2028-29, increasing to £1.9 billion in 2030-31 in line with the Consumer Price Index. £200 million will be allocated towards expanding EV charging infrastructure, Ms Reeves confirmed, whilst the threshold for the expensive car supplement on EVs will rise to £50,000 in a bid to offset the new distance-based charge.
This means that purchasers of EVs below this price point won’t be liable for the additional charge – also referred to as the ‘luxury car tax’. She calculated that this would save over one million motorists £440 annually.
The statement represents the second significant change for EV drivers this year. In April, electric car owners were required to pay EV road tax for the first time, with zero-emission vehicles previously exempt from Vehicle Excise Duty (VED).
Fuel Duty freeze and real-time display
The Treasury confirmed the 5p per litre reduction in fuel duty introduced by the Conservative government in March 2022 would only be maintained until the end of August 2026.
Rates will then progressively return to March 2022 levels by March 2027. This is welcome news as it would have added approximately £500 annually to driving costs for someone with a petrol car featuring a 50-litre tank and covering 8,000 miles.
Fuel duty has remained frozen since April 2010. Prior to the introduction of the 5p per litre reduction, the rate stood at 57.95p per litre. Petrol forecourts will also be required to display real-time fuel prices under a new scheme.
Following the announcement, AA president Edmund King said maintaining the 5p cut in the short-term is “much welcomed and helps everyone”, but cautioned that “drivers will brace themselves for duty hikes from next September”.
“With fuel still accounting for a significant share of household spending, maintaining the 5p freeze will save drivers £3.30 a tank,” he added. “For workers, who are dependent on their cars to commute and fill up twice a month, this keeps £6-£7 in their pocket to battle other costs.”
Motability changes
The Chancellor also confirmed that luxury vehicles would be removed from the Motability scheme. Alfa Romeo, Audi, BMW, Lexus and Mercedes-Benz cars will all be excluded from the initiative, which was established in the late 1970s to enable disabled people, their families and their carers to lease a new car, scooter or powered wheelchair.
Some coupé and convertible models from other brands will also be removed.
