The recently announced 2024 Autumn Budget has introduced a suite of measures that will significantly affect motorists, from electric vehicle (EV) owners to those sticking with internal combustion engine (ICE) vehicles.

The budget will result in key changes which have implications for drivers across the UK.

Vehicle Excise Duty (VED): Rising Costs from 2025

Starting in April 2025, the government will overhaul the first-year VED rates for new vehicles. These changes aim to incentivise the adoption of zero-emission vehicles by increasing costs for hybrids and ICE cars:

• Plug-in Hybrids (1-50g/km CO₂): First-year VED rises tenfold, from £10 to £110.
• Cars Emitting 51-75g/km CO₂: Rates increase from £30 to £135.
• Higher Emission Vehicles: All other rates will double, with a Ford Puma mild hybrid facing a first-year cost of £440, while a high-emission Land Rover Defender could cost £5,490 in the first year.

For EVs, first-year VED will remain low, at £10, but their exemption from annual VED will end. Instead, EV owners will pay £10 annually until 2029-30, when rates will rise.

These changes emphasise the push towards zero-emission vehicles but place a financial burden on buyers of hybrids or conventional cars.

Electric Cars: Taxation and Incentives

The shift to electric mobility remains central to government strategy, but the budget does not offer new financial incentives for private EV buyers. However, the Society of Motor Manufacturers and Traders (SMMT) has called for measures such as:

• Halving VAT on new EV purchases for three years.
• Exempting EVs from the £40,000 Expensive Car Supplement on VED.
• Aligning public EV charging costs with home charging rates (reducing public charging VAT from 20% to 5%).

Without these incentives, EV adoption may slow, particularly as EVs account for only 17% of new car sales in 2024. Production of electrified vehicles has also dipped, highlighting the potential need for stronger policy support.

Company Car Tax: Rising Rates but Still EV-Friendly

Company car tax rates will remain low for EVs, with Benefit-in-Kind (BIK) tax on zero-emission vehicles rising from 5% in 2024-25 to 9% by 2029-30. However, hybrids and ICE vehicles will see steeper increases:

• Hybrids (1-50g/km CO₂): BIK rates will rise to 18% in 2028-29 and 19% in 2029-30.
• ICE Vehicles: Rates increase by 1% annually, reaching a maximum of 39% by 2029-30.

These adjustments mean that EVs remain the most tax-efficient choice for company car users.

Fuel Duty: A Temporary Freeze

In a driver-friendly move the 5p cut to fuel duty introduced in 2022 will remain in place, and no increase is planned for at least another year – sparing motorists an extra 7p per litre.

Pay-Per-Mile Road Tax: Speculation and Reality

Although discussions around a pay-per-mile road tax continue, the government has ruled out introducing such a system for now. However, as EV adoption grows and fuel duty revenues decline, alternative road funding models remain a future consideration.

Investment in Roads and Charging Infrastructure

The budget does allocate additional funds for road maintenance and EV infrastructure:

• £500 Million for Road Repairs: Expected to fix an additional million potholes annually.
• £200 Million for EV Chargers: To accelerate the roll-out of public charging points across England.

While these measures are steps forward, critics argue that more comprehensive support is needed to make EVs accessible to private buyers.

So what does this mean for motorists?

For ICE and hybrid car owners, the 2024 Autumn Budget delivers a clear financial push towards EV adoption through higher VED rates. However, the lack of direct incentives for EV buyers, combined with rising costs for hybrids, may still deter some from making the switch.

Although EV owners still benefit from lower company car tax and modest VED rates, challenges like high upfront costs and disparities in public charging remain unaddressed. With a mix of rising costs and infrastructure improvements, the onus remains on drivers to navigate these changes.

As the 2030 ban on new petrol and diesel car sales looms, and the 2035 zero-emission vehicle mandate takes shape, the automotive landscape is set for significant shifts. Motorists are likely to consider the long-term implications of these policies when making their next car purchase.