All the Budget changes hitting millions of drivers – including 3p-per-mile tax – The Sun
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How the Autumn Budget 2025 changes will affect EV and hybrid owners
CHALLENCOR Rachel Reeves has delivered her Autumn Budget today and there’s plenty in there for motorists to mull over.
Especially for those that drive an EV or a hybrid motor – or were thinking of buying one.
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Perhaps the headline change will be the introduction of a mileage-based charge for electric and plug-in hybrid drivers, which is set to come in from 2028.
A mileage-based EV and hybrid charge will come into effect from April 2028, which means battery-electric and plug-in hybrid cars will face a new mileage-based tax.
For 2028-29, the rates are set at 3p per mile for battery-electric vehicles and 1.5p per mile for plug-in hybrids – with the charge rising annually with inflation thereafter.
The Office for Budget Responsibility (OBR) has estimated that an EV driver covering around 8,500 miles would therefore pay about £255 in that first year – roughly half the effective fuel duty burden on petrol and diesel drivers.
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It’s been suggested the policy will raise significant revenue, with the OBR citing figures in the region of £1.1bn in the first year while accompanying Budget analysis has referenced around £1.4bn rising to about £1.9bn by 2030.
But as a result, the OBR has admitted it expects EV demand to suffer – projecting some 440,000 fewer EV sales over five years which may be partly offset by around 130,000 due to new incentives.
Indeed, this comes on top of EVs beginning to pay Vehicle Excise Duty from April this year – in what is quite the hammering for the electric car industry.
Simon Williams, Head of Policy for the RAC, cautions that per‑mile taxation could slow the transition and notes that VAT on public charging remains 20% versus 5% for domestic electricity – disadvantageous to those without home charging.
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He said: “The government will be aware that taxing all plug-in vehicles per mile from 2028 could slow down the transition to electric vehicles.
“This is no doubt why it has expanded the Electric Car Grant.
“With fuel duty revenue set to decline as more EVs come on to the road, this is one lever the Chancellor clearly feels she can pull to keep the money coming in.
“The implementation will be critical, so the devil is very much in the details.
“We note the government hasn’t cut VAT on public charging from 20% to 5% to match the rate levied on domestic electricity.
“This means drivers who can’t charge at home will continue to pay more.”
While we’re on the subject of grants, the government has said it is significantly scaling up support for EV uptake as, in addition to earlier commitments, the Chancellor has announced a £1.5bn package – including roughly £1.3bn of further funding for the Electric Car Grant so it can run until 2029/30.
This provides grants of up to £3,750 on eligible models, with 35 new electric models currently qualifying – though not all attract the full amount – with recent additions including cars from Toyota, Skoda, Peugeot and Vauxhall.
Many industry voices, including Polestar UK, have welcomed the strong support via grants – but have also stressed that delivery speed and reliability of the nation’s charging infrastructure is also crucial to converting interest into purchases.
To that end, Reeves has set aside around £200m of funding earmarked for EV charging, with the intention to improve its reliability and coverage across the UK – with the hope that it’ll give Brit drivers greater confidence to switch.
To lessen the running-cost increases for cleaner cars, from April 2026 the threshold at which the Expensive Car Supplement applies to EVs will rise – from £40,000 to £50,000.
This will allow more mid‑priced EVs to avoid the controversial levy – which currently adds £425 per year for five years starting in the second year of registration.
The £40,000 threshold will continue to apply to petrol, diesel and non‑plug‑in hybrids.
Reform is coming to the hugely polarising Motability scheme – with the removal of luxury motors from eligibility.
Ministers argue this returns the programme to its original purpose of giving cost‑effective leases for disabled drivers.
This means EV and plug‑in hybrid users on Motability who were considering higher‑end models may find their choices narrowed.
Something for drivers of plug‑in hybrids to think about is that Fuel duty remains frozen until September 2026.
The 5p‑a‑litre cut brought in back in 2022 will start to be rolled back in stages, with duty going up in line with RPI from April 2027.
This matters for plug‑in hybrid drivers who still purchase petrol or diesel.
What’s more, a national Fuel Finder service is due in early 2026 – forcing forecourts to report prices in real time so drivers can locate the cheapest fue.
To put it plainly, pure EV running costs will rise from 2028 due to per‑mile charging, with that rate to then increase with inflation – although some respite can be taken from the fact that the burden remains below full fuel duty on petrol and diesel powered motors.
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Plug‑in hybrid drivers will also face the per‑mile levy on electric miles, plus ongoing exposure to fuel prices and duty on petrol or diesel – albeit helped in the short term by the duty freeze and, from 2026, by Fuel Finder.
However, upfront EV affordability should improve for many thanks to a raising of the Expensive Car Supplement threshold and grant funding, as well as planned investment in charging.
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