What the budget news on EV vehicles actually means

 

The Government’s latest Budget has introduced some key changes for owners and future buyers of electric vehicles (EVs) and plug in hybrids (PHEVs). If you are considering making the switch, here is a simple breakdown of what is coming, the good points, the not so good points, and what you need to think about now.

What Exactly Is Changing? (The Policy in Layman’s Terms)

The main change is the introduction of a new tax system for EVs and PHEVs, replacing the money the Government loses as more people stop buying petrol and diesel. Think of it as a new form of ‘road tax’ based on how much you actually use the car.

• The New Pay Per Mile Charge: From April 2028, fully electric cars and plug in hybrids will start paying a new charge based on the miles they drive, called Electric Vehicle Excise Duty (eVED).
  • Fully Electric Cars (BEVs): You will pay around 3p per mile.
  • Plug in Hybrids (PHEVs): You will pay around 1.5p per mile.
  • This is expected to be about half the tax rate per mile compared to what petrol or diesel drivers pay in fuel duty. You will estimate your mileage and pay this once a year, alongside your existing Vehicle Excise Duty (VED).
• The ‘Luxury Car Tax’ Lifted: Good news for premium EV buyers! The extra tax charged on more expensive cars (over £40,000) will now only apply to EVs with a list price over £50,000 (from April 2026). This saves some buyers around £440 per year for the first five years.
• Grants are Extended: The Electric Car Grant, which gives a discount on the purchase price of some new EVs, has received an extra £1.3 billion in funding and will be extended until 2030.
• More Charging Point Investment: The Government is committing an extra £200 million towards expanding the public charging network.

👍 The Pros and 👎 The Cons

Category	Pros (The Good Stuff)	Cons (The Downside)
Running Costs	Still much cheaper to run than petrol or diesel cars, even with the new per mile tax.	Running costs are increasing from 2028, especially for high mileage drivers.
Buying Cost	Increased threshold for the ‘Expensive Car Tax’ means more mid to high spec EVs avoid the extra tax charge.	The new mileage tax, coupled with the existing VED, may slow down EV adoption, according to some industry analysts.
EV Support	The extension of the Electric Car Grant until 2030 offers sustained incentive and reduces the initial purchase price for eligible models.	For those who rely on public charging, the new tax adds another cost layer, and there is still 20% VAT on public charging (vs 5% for home charging).
Infrastructure	Significant new funding for charging points to help tackle ‘range anxiety’.	The new tax has been criticised for being introduced at a sensitive time in the EV transition, potentially confusing buyers.

🤔 What You Must Now Consider

If you are looking to finance an EV or plug in hybrid now, here are the key factors you should weigh up, focusing on the future cost of ownership:

1. Your Mileage Matters More:
   • High Mileage Drivers: If you drive significantly more than the UK average (around 8,500 miles a year), your running costs will see a more notable increase from 2028 due to the new 3p per mile charge. Factor this into your long term budget.
   • Low Mileage Drivers: The impact will be minimal (e.g., around £255 a year for 8,500 miles). EVs remain the most cost effective option.
2. Home Charging Access:
   • Can you charge your EV at home? Home charging remains significantly cheaper than using public chargers, offering the biggest savings on day to day running costs. If you rely on public charging, the overall cost savings compared to a petrol car will be much smaller.
3. Leasing or Financing Over Time:
   • Consider the 2028 Deadline: If you take out a four year finance deal now, the new pay per mile tax will kick in during the latter half of your agreement. This is a crucial detail for your personal or business budgeting. Leasing often allows for predictable costs, but remember to factor in the future eVED cost for the post 2028 portion of your term.
4. Look for Eligible Discounts:
   • Check if the model you are interested in is eligible for the extended Electric Car Grant to reduce the initial purchase price.
   • If you are eyeing a more luxurious model, the new £50,000 threshold for the Expensive Car Tax might save you money, making a higher spec model a more appealing financial choice than before.

Conclusion

The Budget confirms that the UK’s road to an all electric future is moving ahead, but the free ride on road tax is now scheduled to end. While the new per mile charge adds to running costs from 2028, it is still significantly lower than equivalent petrol taxation. Combined with generous grant extensions and tax breaks on pricier models, going electric remains a financially sound, future proof option for the majority of drivers.

If your considering acquiring a new EV, try our calculator to determine what best fits your pocket.