Chancellor John Healey has unveiled a range of motoring measures in his Autumn Budget, including a fuel duty freeze, an extension of the VAT discount for electric cars, and new business mileage rates. However, one update is likely to leave drivers frustrated: the confirmation of the pay-per-mile scheme for electric vehicles, set to begin in 2028.
Fuel Duty Freeze and Its Limits
The fuel duty freeze, now in its 15th year, prevents an increase in January but does not reduce rates. With diesel prices still hovering around £2 per litre, many motorists are paying hundreds of pounds to fill up. Campaigners such as FairFuelUK and the AA had called for a further cut, but that did not happen, leaving owners of combustion cars disappointed.
VAT Cut Extension and Business Mileage Rates
The extension of Andy Burnham's domestic VAT cut means electric car owners charging at home will pay 0% VAT instead of 5% until July, with rates as low as 7p per kWh. However, millions of homes without driveways will not benefit, as no changes were made to public charging VAT rates.
From April 2027, higher-mileage drivers will see the rate for miles above the 10,000-mile limit rise to 35p per mile, up from 25p. The tax-free rate under 10,000 miles will remain at 55p, a policy continuation that is seen as a win for motorists.
Pay-Per-Mile and VED Hikes
The Treasury confirmed that the new electric Vehicle Excise Duty (eVED) pay-per-mile scheme will take effect in 2028. The plan, which includes a 3p-per-mile fee, has drawn criticism for being unfair to rural drivers who travel longer distances.
Additionally, annual VED car tax bills will rise in line with Retail Price Index (RPI) inflation from April 2027, following the doubling of first-year VED rates in April 2025. This price hike is expected to draw further discontent from road users next Spring.
