The Budget: Four things drivers should know

This week, we saw the unveiling of the new Labour government’s first budget. With public sector spending and tax increases taking the limelight, here are four takeaways for drivers from the budget.

‍Fuel Duty

After it was cut by 5p per litre in 2022 by the Conservatives, the new Labour government has announced that fuel duty will be frozen for another year.  

This is expected to cost the government approximately £3B in 2025/26, and saving each driver around £59 for the year.

Car Tax

The Government has announced that its first year Vehicle Excise Duty for EV and hybrid vehicles rate of £10 for the first year - £190 per year thereafter. Great news, considering they’ve also pledged £200M to accelerate EV charging infrastructure in 2025/26.

However, new EVs registered after 1st April 2025 will be liable to pay for the Expensive Car Supplement – a charge of £410 per year for the first 5 years of the vehicle’s life. Although this only applies to cars costing more than £40,000, that is unfortunately most new EVs on the market – but the government has acknowledged this, and plan to address it at future fiscal events.

National Insurance for employers

You read that right! The rise in national insurance for employers might seem irrelevant to car drivers, but there are two key words that this will mean a lot to: Salary Sacrifice.

Salary sacrifice is, in essence, financing a car from your employer – with monthly payments being taken from your salary before tax. This means that you (and your employer) would pay less tax and national insurance, saving both sides money.  

If you are looking to buy a new car, particularly a hybrid or EV, ask your employer if they offer a salary sacrifice scheme.

Potholes

An unexpected but pleasant surprise in the budget came in the form of a near 50% increase in funding to local road maintenance, with £500m more pledged, to take the total budget to £1.6B.  

Hopefully this will result in smoother, safer roads – and reduce unexpected maintenance costs as a result of potholes or other failed road surfaces.

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