What can drivers expect in the 2025 Autumn Budget?

The Autumn Budget is a yearly document delivered by the chancellor which sets out public spending for the next 12 months. It covers things like tax changes and government borrowing, and it could have an impact on drivers as well.

You could see changes to fuel duty, road tax and other motoring expenses. Chancellor Rachel Reeves delivered a pre-budget speech on 4 November, where she refused to rule out tax hikes but didn’t mention anything about motorists specifically.

Despite this, there are a few things which drivers across the UK need to look out for in the Autumn Budget, including potential changes to the Motability scheme and an increase in fuel duty.

When is the budget?

Labour chancellor Rachel Reeves is set to deliver this year’s Autumn Budget at around 12:30pm GMT on Wednesday 26 November. You’ll be able to hear the statement on major news outlets such as the BBC and on the official GOV.UK website.

So, what car-related changes could be on the horizon? The rumours are already flying – and we’re here to take a look.

Remember, you can buy a brand new or used car right here on Carwow. And you can sell your car, too. We’re here to help you through every step of your car-changing journey.

Pay-per-mile charging for EV drivers

The Chancellor is planning to announce a new pay-per-mile road tax for electric vehicles (EVs), according to a report in the Daily Telegraph.

The proposed charge is 3p per mile, which would cost the average EV driver an estimated £250 per year. Owners of hybrid cars are also expected to pay the pay-per-mile tax but at a lower rate.

The new tax is intended to plug the financial gap left by falling revenue from fuel duty, as more drivers switch to electric cars (which don’t pay fuel duty).

The government reportedly frames the move as a “matter of fairness,” noting that petrol and diesel drivers pay an average of £600 a year in fuel duty.

If announced, the scheme would undergo a consultation and is not expected to be implemented until 2028.

For the full story read: EV drivers: New 3p pay-per-mile tax could cost you £250 a year

Cuts to the Motability scheme

The latest surrounding next month’s Autumn Budget could have a huge impact on many people with disabilities. Reeves is reportedly planning to scale back the Motability scheme, aiming to save around £1bn a year.

The Motability scheme currently supports around 815,000 users. It helps people who receive a qualifying mobility allowance, usually through Personal Independence Payment (PIP), to lease a car, scooter, or powered wheelchair.

The proposed changes could restrict access for some people with disabilities and remove tax breaks that currently make Motability cars exempt from VAT and insurance premium tax. Luxury models such as BMWs and Mercedes – which account for around 40,000 cars – may also be dropped from the scheme, The Times reports.

Disability groups have condemned the government’s plans, warning they would make life harder and more expensive for people with serious health conditions.

Emma Vogelmann from Transport for All said many disabled people rely on the scheme because public transport is often inaccessible. “Scaling back the scheme would lock disabled people away from daily life,” she added.

Charity Scope also warned the cuts could hit lower-income disabled people hardest.

The scheme has faced growing scrutiny in recent months. For instance, Conservative leader Kemi Badenoch controversially claimed at her recent party conference that “those cars are not for people with ADHD.”

Taxing the rich: will this slow down luxury car sales?

Facing what economists are calling a £50bn “black hole” in the public finances, Reeves is reportedly considering tax rises and spending cuts to help close the gap. One area she is looking at is higher taxes on the rich.

But what does this mean for drivers at the top end of the market? If new taxes target the wealthy, those who can afford luxury cars might start feeling the pinch. With less disposable income, some could postpone buying high-end vehicles. This could lead to fewer sales in the luxury car market and potentially affect investment more broadly.

That being said, any direct “wealth tax” would mostly affect the richest of households – so don’t stress quite yet.

Fuel duty rises: could the freeze finally end?

Fuel duty has been frozen since 2011, and the 5p-per-litre cut from 2022 is still in place until March 2026. But with fuel prices steady and inflation cooling, the Chancellor might decide it’s time for a small rise – maybe 1p or 2p per litre.

Any increase would be politically tricky, so if it happens, expect something modest and phased in rather than a big jump. The likelihood of this happening is low, though.

Could salary sacrifice for EVs be targeted?

Salary sacrifice schemes have made electric cars more affordable by letting employees pay through pre-tax salary. But after recent crackdowns on other car ownership tax breaks, there’s some chatter that EV schemes might come under review too.

A full ban looks unlikely – the government still wants people to drive electric, and has its Electric Car Grant (ECG) to back this. But we might see tighter rules or limits on how much tax can be saved.

Road pricing: the pay-per-mile idea

As more people switch to electric cars, the government collects less from fuel and road taxes. With less revenue to fund roads and transport, future budgets may need to find new ways to fill the gap.

So, with EVs on the rise and fuel duty revenues falling, the government will eventually need a new way to tax road use. One idea being floated around is a pay-per-mile charge, where drivers are taxed based on how far (and possibly what) they drive. New research from Carwow shows that nearly half of drivers think a pay-per-mile system would be a fairer way to tax drivers than the current road tax system

Don’t expect any road pricing plans to be put in place any time soon, but it’s definitely part of the long-term plan.

Benefit-in-Kind (BiK) rates for EVs

The BiK rate for company EVs is set to rise gradually from 2% now to 5% by 2027/28. The chancellor could confirm or tweak this schedule to give businesses more certainty, or to raise a little extra tax from pricier models.

Any change here would probably be small and steady rather than a shock increase.

A quiet review on classic car VED exemption

Cars over 40 years old currently pay no Vehicle Excise Duty (VED). There’s a small chance the government could review this exemption to make the system “fairer,” though it would mainly affect a niche group of enthusiasts.

Tax on EV charging to level the playing field

Another area to keep an eye on is how electricity for EVs is taxed. Home charging currently attracts 5% VAT, while public charging is hit with 20%. The government might bring these closer together or add a small charge for rapid public chargers. This would help recover some of the revenue lost from falling fuel duty.

So, expect tweaks from the budget, not shocks

Overall, big changes for drivers look unlikely this year. But a small fuel duty rise, minor EV tax tweaks, or changes to charging VAT all feel possible.

The real shake-up, such as a pay-per-mile tax, is probably a few years away. Still, the direction is clear: as more people go electric, the Treasury is looking for new ways to keep the money rolling in.

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