Autumn Budget 2025
A number of measures were announced in relation to the taxation of low emission vehicles.
Electric mileage supplement
With effect from 1 April 2028 a new electric vehicle excise duty (eVED) will be introduced, in addition to the vehicle excise duty (VED) that was introduced earlier this year for electric vehicles. Drivers of electric or plug-in hybrid vehicles will be subject to a charge based on their annual mileage. The eVED charge will be levied at 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrids. This would equate to an additional £240 per year, for an EV driver based on an average 8,000 miles per year and £120 for plug-in hybrid drivers. The charge is expected to be around half the fuel duty charge paid by an average petrol/diesel driver. It is not yet clear how the annual mileage will be checked, but it is expected that this will be estimated by drivers initially and then potentially checked via annual MOT tests, or for new cars through a new annual check procedure.
Fuel duty freeze
Fuel duty will remain frozen, until 31 August 2026, at its current rate including the 5p per litre discount introduced in 2022. Staged increases will then follow from September 2026, to 57.95p per litre by 1 March 2027. Fuel duty rates will then be updated in line with RPI from April 2027.
Capital allowances for fully electric vehicles
A one-year extension to 100% first year allowances for fully electric cars and the purchase and installation of electric charging points has been announced. For corporation tax purposes, eligible expenditure from 1 April 2026 to 31 March 2027, and for income tax purposes from 6 April 2026 to 5 April 2027, may continue to be fully deducted in the year of purchase.
Benefit-in-kind easement for plug in hybrid electric vehicle company cars
Plug in hybrid electric vehicle (PHEV) company cars are subject to the introduction of new emissions standards between January 2025 to January 2028. The new standards observe higher CO2 emissions than previous standards, which would have the effect of increasing the company car benefit charge for PHEV company cars. The easement will apply to PHEVs meeting the following conditions:
- First registered on or after 1 January 2025
- Registered CO2 emissions figure is 51 or more under any emission standard other than Euro 6d-ISC-FCM or Euro 6e
- Have an electric range of 1 mile or more
For qualifying vehicles, the CO2 emissions figure will be deemed to be a nominal value of 1, so maintaining their existing benefit in kind rate. The easement is to apply retrospectively from 1 January 2025 to 5 April 2028. Transitional provisions will continue to apply for qualifying PHEVs after April 2028 until the earlier of variation, renewal of the arrangement or 5 April 2031.
