2025 Autumn Budget Summary

A term once reserved for preparing a cricket wicket before an innings, during the extraordinarily long run up to Rachel Reeves’ second Budget, “rolling the pitch” has become synonymous with the way the government has prepared the nation for yet more tax increases.

In 2024 the Chancellor heralded her inaugural Budget as a budget to “fix the foundations to deliver change”, announcing at the conference of the Confederation of British Industry, “I'm not coming back with more borrowing or more taxes”.

But, with the UK’s worsening fiscal outlook giving rise to months of speculation about which taxes would increase, the Chancellor confirmed that by 2029 taxes must rise by a further £26 billion per year if the government is to meet its 3 core objectives to cut the cost of living, NHS waiting lists and the national debt. All this whilst increasing its fiscal headroom and growing the economy.

Having flirted with a manifesto breaking increase of income tax rates, Ms Reeves decided instead to extend the freeze on income tax and NI thresholds for an additional 3 years, generating an increase in stealth taxes of £8.5 billion in 2029/30, and £13.5 billion in 2030/31.

Other headline grabbing measures include increased income tax on rental, savings and dividend income, a cap on pension salary sacrifice, powers for local authorities to levy a “tourism tax”, significant increases in online gambling taxes, and the much vaunted “mansion tax” to be raised via a high-value council tax surcharge.

Whilst falling short of the tax raised by last year’s Budget, the highest tax raising Budget in more than a generation, this Budget’s smorgasbord of tax rises will enable the Chancellor to more than double her fiscal headroom to £21.7 billion, whilst funding the summer’s reversal of proposed welfare cuts and lifting the two-child benefit cap.

With the Office for Budget Responsibility (OBR) downgrading its growth forecasts from 2026 onwards, and calculating this Budget will raise taxes to an all-time high of 38% of GDP in 2030/31, Ms Reeves promised to take the “fair and necessary choices” to deliver the government’s promise for change, vowing that she will “not return Britain to austerity”.

So, with a mixed reaction to the Budget as a whole, let’s move on to the measures that will directly affect the automotive sector and fleet industry.

Incentivising the uptake of electric vehicles

In line with the government’s long-term commitment to support the take-up of electric vehicles (EVs), several additional incentives were announced, as outlined below.

Electric car grant

The electric car grant, launched in July 2025 and which has already supported the purchase of 35,000 EVs, is given an additional £1.3 billion of funding and will be extended to 2029/30.

Chargepoint rollout

Alongside the announcement of a review of the cost of public EV charging, which will examine options for lowering these costs, the government has announced an array of funding and other measures to support chargepoint rollout:

• £100 million for local authorities and public bodies to support the training and deployment of specialist staff to accelerate the rollout of public chargepoints;
• £100 million, in addition to £400 million already announced, to invest in EV charging infrastructure, including the installation of home and workplace chargepoints;
• A consultation on permitted development rights for EV charging, in addition to the £25 million already pledged, to accelerate the rollout of cross pavement charging solutions, to make EV charging easier, cheaper and more accessible for households without driveways; and
• A 10 year 100% business rates relief program for eligible EV chargepoints and EV-only forecourts.

Investment in UK automotive

To support the development of UK capability in next generation, zero emission technology, ensuring the UK remains globally competitive, funding for the Drive35 programme will be extended by £1.5 billion to 2035, taking total funding to £4 billion over the next 10 years.

DRIVE35 is a 10 year UK government program to support the country's automotive industry by funding research, development, and the commercial scale-up of zero emission vehicle technologies and their supply chains.

Company car tax

As a result of the re-homologation of plug-in hybrid electric vehicles (PHEVs) under the Euro 6e-bis standards the CO₂ emissions of many PHEVS will increase markedly, giving rise to significant increases in benefit in kind (BiK) tax for up to 150,000 company car drivers.

To mitigate the impact of these changes a temporary BiK tax easement will apply retrospectively from 1 January 2025 in Northern Ireland and from 6 April 2026 in the rest of the UK, until 5 April 2028 where a car:

• Was first registered on or after 1 January 2025;
• Has a CO₂ emissions figure of 51 g/km or more;
• Was not registered under the Euro 6d-ISC-FCM or Euro 6e standards; and
• Has an electric range figure of 1 or more.

The BVRLA believes, “This will remove the need for companies to create systems to cope with two different CO₂ rates. While challenging, this is a major win for the sector from the original position that had been suggested by HMT and HMRC.”

The Budget did not provide any foresight on BiK tax rates beyond 2029/30, but EVs will continue to be the cheapest option for company car drivers, and will remain highly attractive salary sacrifice cars for the foreseeable future.

Van and fuel benefit tax

From 6 April 2026 the van benefit charge, as well as the car and van fuel benefit charges, will be updated in line with inflation.

Capital allowances

Capital allowances provide tax relief on the costs of capital assets, such as cars and vans, in place of commercial depreciation on which tax relief is not available. Capital allowances are claimed either over a number of years via writing down allowances (WDAs), or all at once via a first-year allowance (FYA) with excess relief being typically repaid over a number of years after the sale of the vehicle by the business.

The main rate of WDAs has been set at 18% per year since 2012. This rate will be reduced to 14% per year, with effect from April 2026.

The 100% FYA for zero-emission cars and electric vehicle charge-points will be extended by 1 year to April 2027, but no announcement was made with regard to zero-emission vans.

From 1 January 2026 a new FYA of 40% will be introduced for vans, including those bought for leasing.

Toby Poston, Chief Executive of the BVRLA commented “… we are delighted that leasing is being added to the new 40% capital allowances regime. This major breakthrough will accelerate investment in commercial vehicles for the rental and leasing sectors.”

There is no change to the WDA on the special rate pool which is currently 6%.

Vehicle Excise Duty (VED)

Generally VED rates will be uprated in line with RPI from 1 April 2026.

A more important announcement was the proposed launch of electric vehicle excise duty, or eVED. Subject to a consultation that will run until 18 March 2026, the following pence per mile (ppm) charges will be introduced from April 2028 and will rise in line with CPI each year thereafter:

• zero-emission cars – 3 ppm; and
• plug-in hybrid cars – 1.5 ppm.

HM Treasury estimates that the average EV owner, driving 8,000 miles per year will pay an additional £240 per year.

With the OBR forecasting that 440,000 fewer zero-emission cars will be sold between 2025 and 2031 as a result of this policy, the BVRLA’s Chief Executive, Toby Poston said, “…the Government’s plan for a new pay-per-mile eVED regime from 2028 is poorly timed and very problematic to implement. In its current form, this retrospective [regressive] tax will punish existing EV users and provide yet another deterrent to those considering the move.”

Putting the eVED into context though, it’s been widely suggested that the eVED will be just half the rate of the fuel duty payable on petrol and diesel, which is also subject to VAT!

The threshold for the VED Expensive Car Supplement will rise to £50,000 for zero-emission cars from 1 April 2026, and will apply retrospectively for cars registered from 1 April 2025, unless the car is sold before April 2026 when the current £40,000 threshold will apply to the new owner for the rest of 2025/26 licence period.

The threshold is maintained at its current level of £40,000 for all other cars.

Fuel duty

The longstanding freeze of fuel duty will end in 2027 when it will be uprated in line with inflation once again, with the temporary cut introduced in 2022 being reversed gradually, as outlined below:

• 1p on 1 September 2026;
• 2p on 1 December 2026; and
• 2p on 1 March 2027 (returning rates to pre-March 2022 levels).

National Minimum Wage (NMW)

The NMW is to be uplifted to £12.71 per hour from 1 April 2026; a rise from £22,222 per annum to £23,132 for someone working 35 hours per week.

Whilst generally being good news for the lower paid, it could affect the ability of some employees to participate in salary sacrifice schemes.

Salary sacrifice

Whilst the Chancellor announced that a £2,000 annual cap will be applied to pension contributions made by salary sacrifice from April 2029, no change was proposed to salary sacrifice for cars, which will be welcomed by the automotive sector.

Welcoming this, the BVRLA’s Toby Poston commented “Car salary sacrifice has been a powerhouse of the EV transition, so retaining long-term government support for this and the current Benefit in Kind regime is welcome.”

Employee car ownership schemes

As announced at last year’s Budget, the government plans to amend the benefit in kind rules so that cars provided through Employee Car Ownership Schemes (ECOS) will be taxable benefits. However, to allow more time for employers to prepare for this change, its implementation will be delayed until 6 April 2030, with transitional arrangements applying until April 2031.

Motability

To ensure that the Motability scheme protects the most vulnerable, the Chancellor announced that she will introduce reforms to reduce the generous taxpayer subsidies available, which are being used to lease luxury cars, in an effort to get the scheme back to its original purpose of offering cost effective leases to disabled people.

Motability has confirmed that it will remove luxury brands from the scheme, including Alfa Romeo, Audi, BMW, Mercedes and Lexus, and seek to ensure that 25% of cars on the scheme will be British built by 2030.

Conclusion

Transport is key to the government’s clean energy mission, and the transition to EVs remains crucial to decarbonising transport as well as supporting growth and productivity across the UK.

With around 1.4 million electric cars already on our roads the government reaffirmed its commitment to phase out new petrol and diesel cars by 2030, and to ensuring that all new cars and vans sold in the UK from 2015 will be zero emission.

Continuing its support of EVs, the electric car grant will be extended, the threshold for the expensive car supplement will be raised for EVs, there is no change to EV salary sacrifice and EV BiK tax rates remain significantly below those of petrol and diesel cars for the rest of the decade.

Though the eVED of 3 ppm is set to come into force from April 2028, this will be just half the fuel duty charged on petrol and diesel. EVs therefore will continue to be the most cost effective company cars for employees and employers alike.

Reacting to the Budget, Mike Hawes, CEO of the SMMT acknowledged that the “Government has recognised the automotive industry as a pillar of national strategic importance, backing it with an industrial strategy and additional £1.5 billion to drive competitiveness and investment. Deferring the end of employee car ownership schemes into the next parliament, meanwhile, will be welcomed by workers across the sector.”

However, whilst recognising that “Changes to the VED expensive car supplement are welcome, as is the additional £1.3 billion funding for the Electric Car Grant and support for charging infrastructure”, Mr Hawes added that “These will help, but will not offset the impact of introducing a new electric-Vehicle Excise Duty – the wrong measure at the wrong time.”