Chancellor Rachel Reeves has outlined her 2024 Autumn Budget, introducing key changes in road tax (Vehicle Excise Duty) and maintaining a freeze on fuel duty. Here, we break down what car owners and motorists can expect from these new measures starting in 2025 and beyond.
Fuel Duty Freeze
In a surprising move, Reeves confirmed that fuel duty will remain unchanged for at least another year, with the existing 5p per litre cut introduced in 2022 also staying in place. Reversing this cut would have added 7p per litre to fuel prices starting April 1, 2025, a measure widely anticipated as a revenue boost for the Treasury. Instead, the duty will remain at 52.95p per litre.
Reeves explained, “In these challenging times, with the cost of living still high and global uncertainties, raising fuel duty next year would be the wrong choice for working people.”
Changes to Vehicle Excise Duty (VED) in the Autumn Budget
From April 1, 2025, there will be a significant overhaul to first-year VED rates, designed to encourage the purchase of zero-emission and electric vehicles by increasing the cost gap between them and internal combustion engine (ICE) cars.
One of the most impactful changes is the tenfold increase in first-year VED for vehicles emitting between 1-50g/km of CO₂, which includes many hybrids. Rates for this category will rise from the current £10 to £110, affecting most plug-in hybrids. Cars emitting 51-75g/km of CO₂ will see their VED increase from £30 to £135, while other rates will double, meaning the owner of a new VW Golf 1.5 TSI, for example, will pay an additional £220 in the first year. Meanwhile, the first-year rate for high-emission vehicles like the BMW X5 M60i will increase by £2,745.
Standard VED rates after the first year will continue to adjust with the Retail Price Index (RPI). However, the government has indicated it may reassess the Expensive Car Supplement for electric vehicles in a future budget. Currently, vehicles priced above £40,000 face an additional £410 annual VED charge for the first five years post-registration.
Company Car Tax and Other Allowances
Benefit-in-Kind (BiK) tax rates for company cars will remain at 2% through 2026, and double-cab pickups will be treated as cars for capital allowances and BiK taxation from next April. This update will impact how businesses claim deductions on these vehicles.
Infrastructure and Industry Investment
The budget also includes a £500 million increase in funding for road maintenance from April 2025, expected to result in the repair of an additional one million potholes per year. Additionally, £200 million has been allocated to expand EV charging infrastructure across England. However, there are no new measures to incentivize electric vehicle purchases among private buyers—a point of continued advocacy by the Society of Motor Manufacturers and Traders.
A further £2 billion has been pledged to support the UK’s automotive sector in bolstering the electric vehicle industry and expanding manufacturing capabilities, though details on how this will be implemented remain to be clarified.
