The 2025 Budget has thrown up a number of points of interest for motorists, with revisions to the rules around VED and the Electric Car Grant.
But what do we know so far?
Electric Car Grant:
The Electric Car Grant will now run to 2030, offering discounts of between £1,500 and £3,750 off the cost of a new EV.
The Ford Puma Gen-E, Nissan LEAF and Citroen e-C5 Aircross are amongst those cars that qualify for the full Band 1 discount.
Expensive Car Supplement:
Any car costing more than £40,000 is currently subject to the Expensive Car Supplement, which adds an additional £425 to the annual Vehicle Excise Duty from the second year the car is registered through to the sixth – so a five year period in total.
From 1 April 2026, the threshold at which this tax will apply to Battery Electic Vehicles will be increased to £50,000, meaning significant savings for anyone purchasing an EV in the £40,000-£49,999 bracket.
Electric Vehicle Excise Duty:
From April 2028, drivers of Battery Electric Vehicles will pay Electric Vehicle Excise Duty at a rate of 3p per mile, with drivers of plug-in hybrid cars paying 1.5p per mile.
eVED will be collected alongside the existing Vehicle Excise Duty on a vehicle, with a consultation underway into how the system will operate.
It has already been confirmed however that drivers will not be required to fit trackers to their vehicles to record trips for the purposes of eVED.
Although it is expected that the move will result in the average EV driver paying around £240 per year, this remains significantly lower than the fuel duty that would be paid on a traditional ICE vehicle over the same period.
"While it is fair for EV drivers to contribute for their car usage in the same way as those driving petrol and diesel cars, the government is committed to ensuring that driving an EV remains an attractive choice for consumers," the Budget statement read.
"Therefore, the tax paid by EV drivers will be around half the fuel duty rate paid by the average petrol/diesel driver, with a reduced rate for plug-in hybrid drivers."
Revenue generated by eVED will support investments in the road network.
Fuel Duty:
A temporary 5p cut in fuel duty on both petrol and diesel will be extended through to September 2026 but will then rise in stages.
ECOS:
Change to the rules around Employee Car Ownership Schemes will be delayed until April 2030.
EV Charging:
An extra £100m will be invested in improving EV charging infrastructure, inclduing funding to support home and workplace charging points.
A consultation will also be launched on permitted development rights for those who do not have access to a driveway and need to use cross-pavement charging.
Motability:
A number of revisions have been made to the Motability scheme, which includes the removal of premium brands such as Audi, BMW and Mercedes from the programme.
Certain tax breaks that were in place for Motability customers have been removed, with any top-up payments becoming subject to VAT from July 2026, and Insurance Premium Tax being added to cover provided by Motability.
Tax changes will not apply to those vehicles that have been adapted to meet the needs of wheelchair users.
“These tax changes mean extra cost, so we now need to review how the Scheme works to help keep it as affordable as possible for our customers,” Andrew Miller, CEO of Motability Operations, said.
“At the same time, we’re also looking at how we respond to the wider world. Costs have been rising for some time. This is something we’ve already spoken about with customers. The recent tax changes mean we now need to look more carefully at how we manage those costs to limit the impact on you and the price you’ll need to pay.
“Over the next six months, we’ll be preparing to evolve the Scheme, looking at what we include, how we manage costs and how we make sure the Scheme stays sustainable for the long term. We’ll be speaking with customers as we look to make these changes, and we’ll be doing everything we can to protect what matters most to you.
“In the meantime, we’ll continue to make smaller, practical updates if we find ways to save money or work more efficiently.”
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