The UK Chancellor, Rachel Reeves, is set to announce the Autumn Budget for 2025/26, and this year’s fiscal plan could significantly impact drivers across the country. While many dismiss budget announcements as distant Whitehall politics, several proposed changes have the potential to reshape how millions of motorists pay for and use their vehicles. This article breaks down the key rumors, leaks, and government hints to explain what drivers should expect.
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Pay-Per-Mile Tax for Electric Vehicles
The most controversial proposal is a pay-per-mile tax, also known as “road pricing,” specifically for electric vehicles (EVs). As fewer drivers purchase petrol and diesel, the government faces a shrinking revenue stream from fuel duty. This tax aims to fill that gap by charging EV drivers a fixed rate per mile driven – potentially on top of existing Vehicle Excise Duty (VED).
The rumored rate is around three pence per mile, which would add roughly £12 to a London-Manchester round trip. Analysts estimate the annual cost for drivers could range from £250 to £300. Hybrid vehicles might also be included, but at a lower rate to reflect continued fuel tax revenue. HM Treasury stated that this system would create “a fairer system for all drivers,” but it’s likely to be met with resistance. The rollout is tentatively slated for 2028, following public consultation.
Reversal of the 5p Fuel Duty Cut
Since 2022, a five-pence cut in fuel duty has helped ease high prices at the pump. However, with some analysts questioning whether these savings have been passed onto consumers, the government may reverse this cut in the upcoming budget.
Without it, petrol and diesel prices could climb to over £1.42 and £1.50 per liter, nearing all-time highs. Edmund King, President of the AA, warns that increasing motoring costs “hammers working people, adds costs to deliveries and businesses… and ultimately fuels inflation.”
Changes to the Motability Scheme
The Motability scheme, which provides accessible transportation to disabled people in exchange for Personal Independence Payment (PIP), is also under review. With over 860,000 participants as of March 2025, the government could save up to £1 billion per year by tightening eligibility criteria, restricting luxury vehicle choices, and removing tax breaks (such as VED exemptions for Motability customers). This comes amid broader crackdowns on disability benefits.
Increased Funding for Road Maintenance
Last year, the Labour government allocated an additional £500 million annually for local road maintenance, bringing total funding to £1.6 billion. Another increase in 2026 is likely, given the Asphalt Industry Association estimates that fixing the UK’s roads could cost up to £17 billion. This suggests continued investment in pothole repairs, though whether it will keep pace with the problem remains uncertain.
Lower EV Charging Costs
Currently, public EV charging costs significantly more than home charging due to higher VAT (20% vs. 5%) and chargepoint operator recouping installation costs. This disparity hinders EV adoption, and the RAC’s Rod Dennis argues that reducing VAT on public charging to match home rates would be a “huge help.” Such a move could also offset the impact of a pay-per-mile tax on EVs.
Conclusion: The Autumn Budget 2025 could bring sweeping changes for UK drivers, from new taxes on electric vehicles to potential increases in fuel costs and restrictions on disability benefits. These measures reflect a broader shift in government policy as it seeks to adapt to the decline of traditional fuel revenue and address budget pressures. The final impact will depend on the Chancellor’s decisions, but motorists should brace for potential financial shifts in the coming year.
