How Does the UK Budget 2025 Affect Drivers and EV Owners?
The 2025 Autumn Budget, delivered on 26 November, brings significant changes to motoring costs for both traditional vehicle drivers and electric vehicle owners. Chancellor Rachel Reeves announced a mix of measures that will reshape how drivers pay for road use, with the most notable being a new pay-per-mile system for electric vehicles set to begin in 2028.
The New Pay-Per-Mile Tax for Electric Vehicles
From April 2028, electric vehicle owners will face a new mileage-based charge known as eVED (Electric Vehicle Excise Duty). This system will require EV drivers to pay 3p per mile, whilst plug-in hybrid vehicle owners will pay 1.5p per mile. The charge will increase annually in line with inflation.
The implementation mechanics are straightforward. Drivers will estimate their annual mileage when paying their Vehicle Excise Duty, with the option to pay upfront or via Direct Debit. The reported mileage will then be verified annually through existing MOT tests. For new vehicles not yet due an MOT, an annual check procedure at MOT stations will provide the necessary verification.
For context, an average driver covering 8,500 miles per year would pay approximately £255 in 2028-29 under this system. This represents roughly half the per-mile rate that petrol and diesel drivers currently pay through fuel duty.
Changes to Fuel Duty
The current 5p fuel duty cut, introduced in 2022 in response to rising fuel prices caused by the war in Ukraine, will remain in place until September 2026. However, the reprieve is temporary. The Budget introduces a staggered approach to reversing this discount:
| Date | Fuel Duty Increase |
|---|---|
| 1 September 2026 | +1p per litre |
| 1 December 2026 | +2p per litre |
| 1 March 2027 | +2p per litre |
From April 2027, fuel duty will increase annually in line with the Retail Prices Index. Fuel duty has been frozen for 16 consecutive years, which cost the Government approximately £100 billion in lost revenue between 2011 and 2024.
Electric Vehicle Grant Extension and Support
To offset the impact of the new mileage charges, the Government has committed an additional £1.3 billion to extend the Electric Car Grant until 31 March 2030. The grant currently offers up to £3,750 for eligible electric vehicles that meet strict sustainability requirements for manufacturing and battery production. More than 35,000 drivers have already benefited from the scheme since its launch in July 2025.
Qualifying for the full £3,750 grant requires vehicles to meet demanding criteria. To date, only four models have qualified: the Citroen e-C5 Aircross Long Range, Ford Puma Gen-E, Ford E-Tourneo Courier, and Nissan Leaf. Other models, including the Renault 5, qualify for a smaller £1,500 discount.
Changes to the Expensive Car Supplement
One piece of welcome news for EV buyers concerns the "luxury car tax". The expensive car supplement, an additional £474 annual charge applied to vehicles costing over £40,000, will see its threshold for electric vehicles raised to £50,000 from April 2026. This change applies to EVs registered from 1 April 2025.
This adjustment reflects the reality that many electric vehicles carry higher list prices than their petrol or diesel equivalents due to battery costs, and brings more models within reach of buyers seeking to avoid the supplement.
Charging Infrastructure Investment
The Budget allocates an additional £200 million for EV charging infrastructure, supplementing the £400 million already announced at the Spending Review. This funding aims to support the UK's target of 300,000 charge points by 2030, including provision for home and workplace installations.
Notably, public EV charging continues to attract 20% VAT, unlike domestic electricity which is charged at 5%. The Government has not committed to reducing this disparity, though a review into public charging costs will commence in the first quarter of 2026, examining the impact of energy prices and other cost contributors.
Additionally, the Budget introduces a 10-year 100% business rates relief for EV charge points and EV-only forecourts, alongside a one-year extension to 100% First Year Allowances for zero emission vehicles and EV charging infrastructure.
The New Fuel Finder App
From early 2026, motorists will gain access to a new government platform called Fuel Finder. This system will mandate all petrol stations to display their fuel prices in real time, allowing drivers to identify the cheapest forecourt fuel wherever they are. The average household could save around £40 annually using this tool.
Impact on EV Adoption
The Office for Budget Responsibility forecasts these measures will reduce EV sales by approximately 440,000 vehicles between now and March 2031. However, the expanded Electric Car Grant is expected to offset this by encouraging around 320,000 additional sales.
The fiscal watchdog notes that the reduction in EV demand could make it harder for manufacturers to meet the Zero Emission Vehicle mandate, which requires 28% of new car sales to be electric in 2025, rising to 80% by 2030. Manufacturers may need to respond by lowering prices or reducing sales of non-EV vehicles to maintain compliance.
The measures represent the Government's attempt to balance several competing priorities: maintaining road maintenance funding as fuel duty revenues decline, supporting the transition to electric vehicles, and ensuring all road users contribute fairly to infrastructure costs.
Looking Ahead for Motorists
The Budget's motoring measures present a mixed picture for different types of drivers. Traditional petrol and diesel drivers face rising costs from September 2026, whilst EV owners will see a shift from zero running taxes to mileage-based charges from 2028. Both groups benefit from improved price transparency through the Fuel Finder app, whilst EV drivers gain from extended grant funding and increased charging infrastructure investment.
For those considering switching to electric vehicles, the financial calculations have become more complex. Whilst the upfront incentives remain strong through 2030, the long-term running costs will now include a per-mile charge that didn't exist before. The raised threshold for the expensive car supplement offers some breathing room for those looking at mid-range electric models, but buyers will need to factor in the 2028 mileage charges when planning their transition to electric motoring.
