The Road Ahead: What the 2025 Autumn Budget Means for UK Motorists

Key facts drawn from our internal budget briefing.

The 2025 Autumn Budget introduces a series of changes that affect motorists, company directors, and fleet managers. This guide explains the measures in plain English, gives practical examples, and outlines actions businesses can take now.

1) eVED: Pay-per-mile for EVs and plug-in hybrids from April 2028

Government plans confirm a pay-per-mile version of Vehicle Excise Duty for zero- and low-emission vehicles starting April 2028, subject to consultation. Electric cars will be charged at 3p per mile, and plug-in hybrids at 1.5p per mile. These rates sit on top of the standard annual VED of £195. A 10,000-mile year could mean about £495 in total for an EV. Mileage is expected to be verified from MOT history, with no tracking devices in cars.

Example: 10,000 miles in a fully electric car, £195 standard VED plus 3p per mile equals £495 for the year.

2) Expensive Car Supplement threshold rises to £50,000 for EVs

The Expensive Car Supplement adds £425 per year to the usual VED for five years, beginning in year two of a car’s life. For fully electric vehicles registered after 5 April 2025, the threshold moves from £40,000 to £50,000. Optional extras and VAT count towards the initial list price, so high-value specifications can still push a car above the limit.

Tip: When ordering new EVs, review specifications carefully. A panoramic roof or tow bar can add cost and trigger the supplement if the total exceeds the threshold.

3) Hybrid emissions and a BiK easement through 5 April 2028

New EU and UN testing standards from 1 January 2025 raise official CO₂ figures for many plug-in hybrids. A model previously rated at 45 g/km could now be reported at 122 g/km, which would move company car Benefit-in-Kind from 15% to 30%. To avoid a sudden increase, a temporary easement applies until 5 April 2028.

- Review hybrid allocations during the easement window, plan replacements, and model BiK beyond April 2028.

- Consider whether fully electric options still provide total cost advantages when eVED arrives.

4) Fuel duty freeze holds until September 2026, then staggered rises

The freeze, including the 5p cut first introduced in 2022, continues until September 2026. Planned increases follow: +1p in September 2026, +2p in December 2026, then a further +2p from 1 March 2027. The AA estimates the freeze saves about £3.30 per tank for now. Increases have been scheduled then delayed repeatedly for 16 years, which leaves some uncertainty.

5) Motability changes from July 2026

VAT relief on advance top-up payments for more expensive vehicles will be removed for new leases from July 2026. Relief on weekly lease costs and resales remains. Premium brands such as BMW, Audi, Mercedes-Benz, and others are removed from the scheme to support a target where half of the fleet is British-made by 2035. Mileage allowances reduce, and overseas breakdown cover ends. Motability Operations expects the average advance payment to rise by around £400.

What this means for businesses and directors

- Model five-year fleet costs today: include pay-per-mile from 2028, project annual VED indexation, and compare EV, PHEV, and ICE scenarios.

- Revisit company car policies: use the hybrid BiK easement to plan orderly replacements before April 2028.

- Specify EVs carefully: keep the EV list price below £50,000 where possible to avoid ECS.

- Exploit the fuel duty window: invest in route planning, driver coaching, and utilisation improvements while the freeze holds.

Quick summary

- Pay-per-mile eVED for EVs and PHEVs from April 2028, rates 3p and 1.5p per mile, on top of £195 standard VED.

- ECS threshold for EVs rises to £50,000 for cars registered after 5 April 2025.

- Hybrid BiK easement runs to 5 April 2028.

- Fuel duty frozen until September 2026, staggered rises after.

- Motability reforms from July 2026, average advance payment expected to rise by about £400.

FAQs

When does pay-per-mile start, and what are the rates?: From April 2028 after consultation, 3p per mile for EVs, 1.5p per mile for PHEVs, payable on top of the £195 standard VED.

What is the new Expensive Car Supplement threshold?: For fully electric vehicles registered after 5 April 2025, the threshold is £50,000, and the supplement is £425 per year for five years. Optional extras and VAT count toward the list price.

How long does the hybrid BiK easement apply?: It runs from 1 January 2025 to 5 April 2028, which gives time to manage the jump in official CO₂ ratings that would otherwise raise BiK percentages.

What is happening to fuel duty?: The freeze, including the 5p cut, holds until September 2026, then rises are staged through March 2027.

What are the Motability changes?: From July 2026, VAT relief on advance top-ups is removed for more expensive vehicles, luxury brands are excluded, mileage limits reduce, and overseas breakdown cover ends. Average advance payments are expected to rise by about £400.