The Autumn Budget 2025 is a big moment for EV drivers in the UK. For the first time, the Chancellor has confirmed a mileage-based tax for electric cars, alongside extra funding for the Electric Car Grant and more money for public charging. There’s also a fuel duty freeze (for now), tweaks to the so-called “luxury car tax”, and a review of public charging prices.

Some of the changes will increase the cost of running an EV. Others are clearly designed to soften the blow and keep the transition to electric moving. In this guide, we break down what was actually announced, and what it all means if you drive – or are thinking about buying – an electric car.

What Did the Autumn Budget 2025 Announce for Electric Cars?

From an EV driver’s point of view, five things really matter in this Budget:

A pay-per-mile tax for EVs and plug-in hybrids from April 2028
A continued freeze in fuel duty until September 2026
A higher “luxury car tax” (Expensive Car Supplement) threshold for EVs
Extra funding and an extended life for the Electric Car Grant
New money and a formal review of public charging prices, plus 10-year business rate relief for sites with chargers

On top of that, the government has confirmed that EVs will continue to pay Vehicle Excise Duty (VED), which started for zero-emission cars in April 2025.

Put together, this is a big shift towards treating EVs as “normal” cars for tax, while still trying to keep them attractive enough to hit net zero and ZEV mandate targets.

How Will the New EV Pay-Per-Mile Tax (eVED) Work?

From April 2028, battery electric cars and plug-in hybrids will be taxed on how many miles they drive. This new system is being dubbed eVED.

For the 2028–29 financial year:

Battery electric cars are expected to pay around 3p per mile
Plug-in hybrid cars are expected to pay around 1.5p per mile

Electric vans, trucks and motorcycles will initially be exempt from the mileage charge.

The Office for Budget Responsibility (OBR) estimates that a typical EV driver travelling 8,500 miles a year would pay about £255 in that first year – roughly half the effective per-mile fuel duty rate currently paid by petrol and diesel drivers.

The charge is designed to rise each year in line with inflation, and it’s forecast to raise more than a billion pounds in the early years and around £7 billion a year by 2050–51.

How Will Drivers Report Their Mileage?

This isn’t going to be tracked by live telematics (for now). Instead, the system will be built around self-reporting and the MOT.

Drivers will be expected to:

Estimate how many miles they will drive in the year
Either pay up front or spread payments monthly by Direct Debit

Then, once a year, that estimate will be checked:

For most cars, mileage will be verified at the MOT test
For new cars not yet due an MOT, there will be an annual check at MOT stations or similar sites

If you’ve driven more than you estimated, you’ll need to pay the difference. If you’ve driven less, in theory you should receive a refund or a credit.

The government has chosen this approach because it’s relatively simple and avoids the “Big Brother” concerns of GPS-based tracking, but it does mean fleets and businesses will need new processes to gather and report accurate mileage.

Will Pay-Per-Mile Slow Down EV Adoption?

The OBR thinks the answer is yes – at least initially. Its modelling suggests that the new mileage-based tax will mean around 440,000 fewer EVs are sold over the next five years than previously forecast.

That headline number is partly offset by other measures in the same Budget:

Raising the Expensive Car Supplement threshold for EVs from £40,000 to £50,000 from April 2026
Pumping an extra £1.3 billion into the Electric Car Grant, which offers up to £3,750 off EVs under £42,000

Those two changes are expected to bring back around 130,000–320,000 additional EV sales versus what would otherwise happen, depending on the modelling you look at.

Even so, every major EV body quoted in your source material – from EVA England to charge point operators and trade bodies – is basically saying the same thing: this is a risky time to layer extra costs onto EV running, just as the market is starting to find its feet.

What Happens to Fuel Duty and Petrol/Diesel Drivers?

For petrol and diesel drivers, the Chancellor has frozen fuel duty again, but only until September 2026. The temporary 5p cut, first introduced in 2022, stays in place for now.

After that:

The 5p cut will be phased out in stages
From April 2027, fuel duty will begin to rise in line with the Retail Prices Index (RPI)

So while EV drivers are being brought into a new mileage-based tax from 2028, internal combustion engine (ICE) drivers are facing a slow but steady increase in the cost of fuel duty.

What’s Changing with the Expensive Car Supplement (“Luxury Car Tax”) for EVs?

Right now, the Expensive Car Supplement (often called the “Luxury Car Tax”) applies to all cars with a list price above £40,000. It adds around £425 per year on top of standard VED for five years, starting from the second year after registration.

The Budget makes an important change for electric cars:

From April 2026, the threshold for EVs rises from £40,000 to £50,000
The £40,000 threshold will still apply to petrol, diesel and hybrids

For new EV buyers, this means a lot more electric cars will sit under the luxury tax line. For anyone considering something like a better-specced electric SUV or family car, that’s a meaningful saving over the first six years of ownership.

How Has the Electric Car Grant Been Extended?

The UK’s Electric Car Grant has been given a sizeable boost:

An extra £300 million has been allocated to allow it to continue until 2030
In total, the government is now investing £1.3 billion into the scheme
The grant allows up to £3,750 off the price of an EV under £42,000, depending on how and where the car is built and whether it meets sustainability rules

The number of eligible vehicles has been expanded, although only a handful currently qualify for the full £3,750. Examples mentioned in your source include:

Ford Puma Gen-E
Ford E-Tourneo Courier
Citroën ë-C5 Aircross Long Range
The new UK-built Nissan Leaf

This is very clearly designed to offset some of the negative sentiment around eVED and keep EVs financially attractive to buyers in the sub-£42k space.

Will Public Charging Get Cheaper or More Widely Available?

The government has committed to:

A formal review of public charging costs, starting in Q1 2026 and reporting in Q3
Looking at the impact of wholesale energy prices, 20% VAT on public charging, standing charges, policy levies and grid connection costs
Providing an extra £200 million to help the UK hit its target of 300,000 charge points by 2030, including support for home and workplace charging
Giving businesses with EV chargers 100% business rate relief for 10 years – this includes public charging networks

That last point is important. Without rate relief, charge point operators would likely pass those costs straight on to drivers. Industry bodies are broadly positive about the long-term direction, but many are openly frustrated that:

VAT on public charging is still 20%, vs 5% for domestic electricity
Standing charges and energy costs have not been immediately tackled

The charging industry is basically saying: the review is welcome, the money is helpful, but drivers need relief on costs sooner rather than later.

How Does This Budget Change the Running Costs of an EV?

If you own or are thinking about owning an EV, the Budget affects your running costs in three main ways:

From 2025: you already pay Vehicle Excise Duty like any other car
From 2028: you’ll also pay around 3p per mile in eVED (if you drive a full BEV)
Public charging remains relatively expensive, with 20% VAT staying in place for now

However, there are also savings and incentives:

The Electric Car Grant reduces upfront costs on eligible EVs
The higher “luxury tax” threshold means fewer EVs get hit with the Expensive Car Supplement
Business rate relief and infrastructure funding should make it easier to find chargers and support long-term price stability

Overall, EVs will still usually be cheaper to run per mile than petrol or diesel equivalents – especially if you can charge at home – but the gap is narrowing, and the Budget is clearly signalling that long-term, EV drivers will be expected to contribute more to road funding.

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What Does This Mean for Fleets and High-Mileage Drivers?

For fleets and high-mileage drivers, the implications are significant:

A typical EV doing 8,500 miles a year will pay around £255 in eVED at the 3p rate in 2028–29
Large electric fleets could be looking at an extra tens of thousands of pounds a year in tax
Businesses will need new processes to track mileage accurately, allocate costs and stay compliant

Some fleet and charging experts quoted in your material warn that this could be a serious extra overhead at a time when balance sheets are already under pressure. There’s also concern that those who rely on public charging – often rural drivers and lower-income commuters – may be hit hardest if the system isn’t designed carefully.

Is This Budget Good or Bad News for EV Drivers?

It really depends where you sit.

Positive for EV drivers:

More money for the Electric Car Grant
Higher threshold for EV luxury car tax
Extra funding for charging infrastructure
Business rate relief for charge sites
Fuel duty ultimately rising for petrol and diesel cars

Negative or risky for EV drivers:

New pay-per-mile charge from 2028
EVs continue to pay VED
No immediate fix for 20% VAT on public charging
Added complexity and admin, especially for fleets

The EV industry’s reaction ranges from “inevitable but needs careful design” to “the wrong tax at the wrong time”. Almost everyone agrees on one thing: how eVED is implemented, communicated and adjusted over time will determine whether this Budget nudges EV adoption forward, or knocks confidence just as momentum is building.

EV Budget 2025 FAQs

1. What is eVED and when does it start?

eVED is a new mileage-based tax on electric and plug-in hybrid cars. It starts in April 2028 and charges drivers based on how many miles they drive each year.

2. How much will EV drivers pay per mile?

The government plans to set the initial rates at around 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids in the 2028–29 financial year. The rates are expected to rise in line with inflation.

3. Are electric vans included in the pay-per-mile tax?

No. Electric vans are explicitly exempt from eVED at this stage, along with electric trucks and motorcycles.

4. Will EV drivers still pay Vehicle Excise Duty (road tax)?

Yes. From April 2025, electric cars pay VED like other cars, and that continues alongside the new mileage-based charge from 2028.

5. How will the government know how many miles I’ve driven?

Drivers will estimate their annual mileage and pay up front or monthly. That estimate will then be checked once a year using:

Mileage readings at the MOT test, or
For new cars not yet due an MOT, a separate annual check at MOT stations

Any under- or over-payment will be adjusted at that point.

6. Will pay-per-mile tax make EVs more expensive to run than petrol cars?

Based on current modelling, the per-mile cost for EVs will be about half the effective fuel duty rate for petrol and diesel cars. EVs should still be cheaper to run overall, especially if you mainly charge at home, but the gap is smaller than it was.

7. What is happening to fuel duty for petrol and diesel cars?

Fuel duty remains frozen until September 2026, with the 5p cut still in place. After that, the cut will be reversed in stages, and from April 2027 fuel duty will start rising in line with RPI.

8. How is the Electric Car Grant changing?

The Electric Car Grant is being extended with £1.3 billion of funding in total, allowing it to run until 2030. It offers up to £3,750 off EVs under £42,000, depending on the car and how it’s built.

9. Which EVs qualify for the full £3,750 grant?

Only a small number of models qualify for the maximum discount, including examples like the Ford Puma Gen-E, Ford E-Tourneo Courier, Citroën ë-C5 Aircross Long Range and the new UK-built Nissan Leaf. Eligibility depends on government rules around sustainable production.

10. What is the “luxury car tax” threshold for EVs now?

From April 2026, the Expensive Car Supplement threshold for EVs rises from £40,000 to £50,000. That means many more electric cars can avoid the extra £425 per year charge in years two to six. The £40,000 threshold remains for petrol, diesel and hybrids.

11. Is the government cutting VAT on public EV charging?

No. Despite heavy lobbying from the EV sector, VAT on public charging stays at 20%, compared with 5% on domestic electricity.

12. Will public charging get any cheaper as a result of this Budget?

Not immediately. However, the government has committed to a review of public charging costs in 2026 and is adding £200 million to support more chargers and help hit the 300,000-charge-point target by 2030. There’s also 10-year business rate relief for sites with chargers, which should help keep long-term costs in check.

13. What support is there for home and workplace chargers?

Part of the extra £200 million funding is earmarked for home and workplace charging provision, and charge point operators get rate relief on sites with chargers. The detail on exactly how this will flow through to households and employers will depend on how the schemes are designed locally.

14. Does this Budget change anything for drivers who rely on public charging?

In the short term, the main pain points remain: higher VAT and higher energy costs at public chargers. The Budget doesn’t fix those upfront, but the cost review and infrastructure funding give some hope of improvements later on – especially if VAT and standing charges are tackled.

15. Will this Budget slow EV adoption?

The OBR expects fewer EVs to be sold over the next five years compared with previous forecasts, largely because of the new mileage-based tax. Extra grant funding and a higher luxury tax threshold for EVs are designed to offset some of that, but many in the industry still see this as a risky time to introduce new costs.

16. Should I delay buying an EV because of these changes?

If you’re looking at an EV under £42,000, you may want to understand exactly how the grant applies to your chosen model. Beyond that, the big changes – eVED and the higher EV luxury tax threshold – don’t kick in until 2026–2028, so there’s time. For many drivers, especially those who can charge at home, an EV will still make financial sense even after these reforms.

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John Ellmore

John is the Editor and Spokesperson for Electric Car Guide.

With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.

John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.