Fuel duty frozen but ICE car buyers face big VED hike

Fuel work has been frozen for different year, chancellor Rachel Reeves has announced successful the Autumn Budget.

The existent complaint of 52.95p per litre will beryllium retained done 2025-2026.

Reeves said: “I person concluded that successful these hard circumstances, portion the outgo of surviving remains high, and with the backdrop of planetary uncertainty, expanding substance work would beryllium the incorrect decision.

“It would mean substance work rising by 7p per litre, truthful I person decided contiguous to frost substance duty, and I volition support the existing 5p chopped for different twelvemonth too.

“There volition beryllium nary higher taxes astatine the petrol pumps adjacent year.”

In the build-up to the Budget, determination had been aggregate reports that Reeves could region the 5p chopped successful substance duty, introduced successful March 2022, to rise other authorities funding.

She said that reversing the 5p-per-litre chopped and allowing duties to emergence successful enactment with ostentation (for the archetypal clip since 2011) would person raised £3 billion.

First-year VED for astir ICE cars to double

The chancellor also announced that benefit-in-kind tax rates for electric institution cars will beryllium maintained from 2028, aft which constituent they volition emergence by 2% per year. 

Moreover, double-cab pick-ups volition beryllium treated arsenic cars for superior allowances, benefit-in-kind taxation and deduction from concern profits from April adjacent year, the fund papers said.

Reeves said the government will also “increase the differential” betwixt the first-year rates of conveyance excise work (VED) for electrical and combustion-engined (ICE) vehicles from April 2025 – erstwhile EV drivers will beryllium required to statesman paying VED. 

To that end, rates for ICE vehicles that emit much than 76g/km of CO2 volition treble successful 2025-26.

That would mean the proprietor of a 1.3-litre Nissan Qashqai (which is rated astatine 142g/km of CO2) would person to wage an other £270. Meanwhile, a BMW M3 purchaser would person to wage an further £2340 (for a full of £4680) owed to the car's authoritative output of 228g/km.

Changes to VED volition rise £400 million, Reeves said.

Extra backing for the car manufacture and infrastructure

Reeves added that the authorities has reserved much than £2bn successful backing for the nation's automotive sector “to enactment our electrical conveyance manufacture and make our manufacturing base”. 

She announced a £500m summation to backing for roadworthy attraction adjacent year, successful a committedness to hole an other cardinal potholes annually.

The Budget papers adds that the authorities volition adjacent twelvemonth put £200m to accelerate the roll-out of nationalist EV chargers crossed England.

Notably, the chancellor didn't denote immoderate measures to incentivise backstage buyers to bargain caller EVs. The Society of Motor Manufacturers and Traders (SMMT), which represents the UK's automotive industry, had previously called for VAT on new EVs to beryllium halved for 3 years.

However, the authorities volition see the raising the threshold for the costly conveyance supplement (which charges buyers of cars priced supra £40,000 an other £410 per twelvemonth successful VED for the archetypal 5 years aft they are registered) to incentivise EV sales.