In a surprising turn of events, the details of the Budget have been leaked early by the Office for Budget Responsibility.
The main news for motorists is the introduction of a new pay-per-mile road tax on electric cars, which has been widely reported leading up to the Budget.
Also referred to as 'road pricing', the new tax will cost 3p per mile for fully electric vehicles and 1.5p per mile for plug-in hybrids. That would equate to an extra £300 a year if you drive 10,000 miles a year in an electric car.
The purpose of the road pricing tax will be to fill the gap in fuel duty revenue that's been caused by more and more drivers switching to electric vehicles. Introducing this tax is expected to bring in £1.4 billion in revenue.
While it's clear that more money needs to be raised, a multi-pronged assault on electric vehicles is a curious solution. At a time when the Government wants more take-up of EVs to reduce the UK's overall carbon emissions, adding another form of tax – after road tax becoming applicable to EVs in April this year – will surely only dissuade potential buyers from ditching their petrol and diesel cars.
Reports suggest that the luxury car tax will be raised for electric cars, from the current £40,000 threshold to £50,000.
The new mileage tax will be introduced in April 2028, at the start of the 2028-29 financial year. The Office for Budget Responsibility report states that, in subsequent years, the cost of the mileage tax will rise in line with the Consumer Prices Index.
It's not yet clear how this tax will be collected or monitored.
The Government did introduce its electric car grant earlier in the year – which gives discounts of either £1,500 or £3,750 on eligible new EVs – but the new tax shows the Government is giving with one hand and taking away with the other.
At the same time, petrol and diesel car drivers have received some positive news. The 5p cut in fuel duty – announced in 2022 – will be frozen for another five months. Staged increases will take place in 2026 and subsequent years.
The Motability scheme seems to be under scrutiny in this Autumn Budget. Drivers with disabilities who receive the Personal Independence Payment (PIP) can lease a new car under the scheme, giving them modern but affordable transport. It's being reported that luxury car models may be excluded from the scheme, that the criteria for PIP eligibility may be tightened, and that Motability drivers could have to start paying road tax.
Reeves' Budget also includes an expansion of the sugar tax to include packaged milkshakes and iced coffees, an increase in the minimum wage and higher tax on houses worth more than £2 million.
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