What Motorists Need to Know!
Yesterday brought us the 2024 Autumn Budget – the first budget from a Labour government in 14 years, and, excitingly, the first ever from a female Chancellor. While I’m no economist, as a motoring journalist, my job is to sift through the details and let you know what this budget means for us drivers. And here’s the big surprise: it’s actually not as bad for motorists as many of us feared! Yes, a collective sigh of relief was heard across the motoring world.
This article will break down the key points that every UK motorist needs to be aware of, and why the worst of our concerns didn’t materialise. But there are some new costs for car buyers, especially those interested in new cars with tailpipes. So, let’s go through it all – the good, the bad, and the slightly confusing.
Fuel Duty Freeze – A Sigh of Relief
Let’s start with the big one: fuel duty. There was widespread concern that Labour’s new Chancellor would increase fuel duty or even scrap the 5p cut introduced by Rishi Sunak back in 2022. Had this happened, fuel tax would have jumped from 52.95p to 58p per litre, pushing petrol to £1.46 and diesel to £1.50 per litre. For the average driver covering 7,400 miles a year, this would have meant an extra £43 annually for petrol cars and £39 for diesels. But, surprise! None of this is happening.
Instead, Chancellor Rachel Reeves opted to keep the 5p cut in place, explaining, “I have concluded that in these difficult circumstances while the cost of living remains high… increasing fuel duty next year would be the wrong choice for working people.” The decision to hold off on a fuel duty increase is expected to cost the Treasury £3 billion for 2025-2026, but it’s definitely a win for motorists.
According to the RAC, eight in ten drivers rely on their vehicles for essential journeys, and in rural areas, 70% have no realistic alternative to driving. This decision acknowledges the importance of keeping transport costs manageable for the vast majority of us.
The ICE Ban – Still Vague
Now, onto the internal combustion engine (ICE) sales ban. While Labour said in their manifesto that would bring the ban back to 2030, Reeves remained vague on this point. The budget document simply states: “The government has committed to phasing out new cars that rely solely on internal combustion engines by 2030, and from 2035 all new cars and vans sold in the UK will be zero-emission.” So, it seems they’re sticking to the 2035 deadline.
Pay-Per-Mile – Dodged, For Now
The dreaded pay-per-mile tax on electric vehicles (EVs) was another potential landmine. Given the loss of revenue from fuel duty as more people switch to EVs, many expected some form of road pricing to make up the shortfall. However, for now, pay-per-mile is off the table. According to the Treasury: “We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles…”
This is temporary relief, though. As EV adoption grows, we can expect this conversation to return, and it may well be a different story in future budgets. But for now, the focus remains on encouraging EV uptake rather than taxing EV users directly.
VED Hikes – The Sting for New Buyers
Now, here’s where it gets painful, particularly for new car buyers.
EVs will lose their exemption from VED from April, and buyers will have to pay the next lowest first-year rate, which is currently £10. However, instead of paying the standard car rate of £190 a year after that, as is currently the case, they will pay £10 a year until 2029-2030, which is some good news for EV owners.
From April 2025, Vehicle Excise Duty (VED) rates for new cars with CO₂ emissions will increase significantly. This means if you’re considering buying new, you’ll want to check those emissions figures more closely than ever before. Here’s how it breaks down:
- Cars emitting 1-50g/km CO₂ – This includes most hybrids, which will see first-year VED rise from £10 to £110. That’s a ten-fold increase! So, if a plug-in hybrid was on your list, be prepared for a steeper upfront tax.
- Cars emitting 51-75g/km CO₂ – Mostly hybrids again, with first-year VED going from £30 to £130.
- Cars emitting 76g/km CO₂ and above – Rates will double across the board.
To give you some examples, the Ford Puma mild hybrid, which emits 122g/km of CO₂, will now carry a first-year VED of £440, up from £220. And if you’re eyeing a high-performance Range Rover V8, which emits more than 255g/km, the first-year VED is leaping from £2,745 to £5,490. Even smaller cars like the Vauxhall Corsa hybrid (emitting 102g/km) aren’t safe, with first-year VED rising from £195 to nearly £400.
Standard VED rates for subsequent years will increase as per the Retail Price Index, as usual, but the first-year rates are where buyers will feel the biggest pinch.
The Treasury expects these hikes to raise around £400 million next year, and £1.7 billion by 2030.
Luxury Car Tax – Still Sticking Around
If you’re looking at buying a car over £40,000, the £410 VED surcharge for five years still applies. However, the budget briefing hints that they may consider raising the threshold for zero-emission cars in future, which would make EVs more accessible at the higher end of the market. But for now, that extra cost remains.
Company Car Tax – Gradual Increases
For company car drivers, the Benefit in Kind (BIK) tax rate for EVs will remain relatively low, but it will start creeping up by 2% annually, reaching 9% by 2030. Meanwhile, company car rates for hybrids and ICE vehicles will rise from 2028 to encourage the shift to electric. For example, BIK rates for cars with emissions between 1-50g/km CO₂ will rise to 18% in 2028 and 19% in 2029.
The maximum BIK rate for high-emission company cars will also rise to 39% by 2030. This gradual increase is meant to incentivise fleet buyers to go electric, which is already the main driver behind EV sales in the UK.
Potholes – A Little Bit of Help
Let’s face it, the state of UK roads is abysmal. Potholes are a constant issue, causing damage to our cars and frustration for drivers everywhere. To tackle this, the budget includes an additional £500 million for road maintenance from April 2025, which will help local authorities repair about one million extra potholes each year. This brings the total road maintenance budget to £8.8 billion, although the Asphalt Industry Alliance estimates it would cost £16.3 billion to fully repair all UK roads.
EV Charging – Some Good News for EV Owners
One of the biggest barriers to EV adoption is the lack of charging infrastructure. The budget has allocated an extra £200 million to expand EV charging points across England. This should reduce range anxiety for potential EV buyers, particularly in rural areas where chargers are scarce. However, the lack of direct incentives for private EV buyers means uptake may still be slower than the government hopes.
Automotive Industry Support – Is It Enough?
The budget pledges £2 billion to support the UK’s automotive industry as it transitions to EV production. This investment is critical for the 800,000 jobs in the UK’s automotive sector, which generates £78 billion annually and exports over 600,000 cars. According to Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), while this funding is welcome, the industry needs further support, especially given the ambitious EV transition targets set by the government.
Without more incentives to stimulate demand for EVs, the sector risks falling behind other markets, reducing investment, and ultimately, jobs. The SMMT continues to push for more substantial measures to encourage EV uptake and support the new car market.
UK Automotive at a Glance – The Numbers That Matter
Here’s a quick snapshot of just how significant the UK automotive sector is:
- £78 billion turnover in 2022.
- 905,117 cars built in 2023, with 606,838 of those exported.
- 800,000 jobs supported across the industry.
With this level of impact on the UK economy, it’s clear that budget decisions affecting the automotive sector have ripple effects on employment, investment, and everyday motoring costs.
What Does All This Mean for You?
In summary, we’ve dodged a few bullets here. Fuel duty remains frozen, so no immediate price hikes at the pump. And that dreaded pay-per-mile scheme? It’s off the table – for now.
If you’re buying a new car, though, prepare for a higher first-year road tax (VED) if it has any CO₂ emissions. For EV owners, there’s more charging infrastructure on the way, but no new incentives to bring private buyers into the fold. And for company car drivers, rates are going up gradually, making EVs a more attractive option.
As for the pothole situation, the extra funding is a step in the right direction, but it’s a long road ahead – literally. And while the government is injecting funds into the UK’s automotive industry, the lack of stronger incentives for EV buyers may hamper the ambitious targets they’ve set.
So, what do you think? Does this budget go far enough in supporting motorists, or are these VED hikes just another obstacle? Drop your thoughts below
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