Rachel Reeves, Chancellor of the Exchequer, has unveiled her first Autumn Budget, and the key takeaways for motorists include a freeze on fuel duty, £500 million extra investment for pothole repairs, and new First Year Vehicle Excise Duty (VED) rates.
Reeves had previously warned that ‘difficult decisions’ would be made to plug a £22 billion ‘black hole’ left by the previous government. Her response is to ‘invest, invest, invest,’ to deliver growth while raising taxes to the tune of £40 billion. While the government promised not to raise income tax or national insurance on working people, commuters will be affected by rises in First Year VED and bus fares.
Other key announcements include an increase in the national minimum wage by 6.7% to £12.21 an hour, employers’ national insurance contributions increasing to 15%, and the abolition of the non-dom status.
Read on to learn the key takeaways for motorists and what these changes will mean for your pocket.
Fuel duty remains frozen
There is to be no rise in fuel duty. Reeves confirmed that the freeze would remain in place for the next year, and she would extend the 5p cut to fuel duty per litre of petrol or diesel introduced in 2022 amid soaring fuel prices until March 2026.
Fuel duty has been frozen since 2012, so any raise in it would prove controversial, especially during a cost of living crisis. Keir Starmer, the Prime Minister, had previously hinted at continuing the freeze on fuel duty, and this news will be welcome relief to all motorists. The Treasury estimates this freeze will save the average car driver £59 per year.
Simon Williams, RAC head of policy, said: ‘Drivers will breathe an enormous sigh of relief after all the speculation that the 5p cut would be scrapped at the same time as pushing duty up beyond the long-term rate of 57.95p. It’s good to see the Government firmly recognising the importance of the car to millions of households up and down the country.
He added: ‘It’s also worth remembering that even as of today, 56% of the total price of a litre of petrol is already tax in the form of fuel duty, and the VAT that is charged on top.’
It’s not all honey and cream, though. The Chancellor announced that the windfall tax on oil and energy companies will increase to 38%, which means prices may well go up as these companies pass these costs onto the pumps.
What this means for you: Fuel prices have been fairly stable these past few months, so a continued freeze should mean prices remain steady. That extra tax on oil companies will probably be passed onto you however.
Vehicle Excise Duty First Year Rates
A bit of a surprise, Vehicle Excise Duty First Year Rates will increase from 1 April 2025. This is to help incentive the adoption of EVs and breaks down as follows:
- Zero emission cars will pay the lowest first year rate at £10 until 2029-30.
- Rates for cars emitting 1-50 g/km of CO2, including hybrid vehicles, will increase to £110 for 2025-2026.
- Rates for cars emitting 51-75 g/km of CO2, including hybrid vehicles, will increase to £130 for 2025-2026.
- All other rates for cars emitting 76 g/km of CO2 and above will double from their current level for 2025-2026.
What this means for you: If you’re buying a new car, this is an incentive for EVs. You will pay more in VED for any non-EV, including hybrids. Cars in the highest CO2 band will be hit exceptionally hard.
Extra money for pothole repairs
One of Labour’s manifesto pledges from this year’s election was to fix one million more potholes per year. Reeves has today confirmed an additional £500 million to help tackle the state of the UK’s roads — £180 million more than the manifesto promised. With the RAC reporting over a million potholes in the UK and pothole-related breakdowns up 53% in 2024 against 2023, this extra funding will be a welcome step for motoring.
The tagline for the Budget is ‘fixing the foundations to deliver change’, so tackling the state of the roads seems like a good starting point.
Funding for these repairs is to be funded by deferring the A27 bypass in Sussex. Louise Haigh, Secretary of State for Transport, previously said: ‘For too long, this country has suffered from a pothole plague. Our roads have become a constant and visible reminder of the decline in our country’s infrastructure, which stunts economic growth.’
What this means for you: Don’t expect your fault commute to become buttery smooth soon, but roads extra money for potholes will start to see the road conditions improve.
Incentives for EVs
The Chancellor said: ‘Labour wants to support the take-up of electric cars,’ and committed to maintaining current incentives for electric cars in company car tax from 2028. She also committed to extending 100% First Year Allowances for electric cars and charge points.
Elsewhere, the government has announced £200 million for more EV charge points.
One of the first actions undertaken by the new government back in July was to reinstate the 2030 new petrol and diesel car ban, following a five-year extension by the previous government.
What this means for you: There’s never been a better time to go electric. With as-yet-unspecified VED incentives for EVs, and some exceptional deals on EVs thanks to those ambitious ZEV mandates, the Society of Motor Manufacturers and Traders (SMMT) estimates that £2 billion is being spent on EV discounts for 2024. We’ve found some stellar deals available.
Fuel Finder
The Chancellor also announced Fuel Finder. Described as an ‘open data scheme for fuel prices and a market monitoring function’ it will provide consumers with increased transparency and allow them to find the cheapest fuel prices local to them. Set to be implemented by the end of 2025, the government predicts it could help reduce costs by 1-6p per litre, a huge saving for motorists.
Simon Williams said: ‘This will help drivers get a fairer deal every time they fill up by enabling them to find the cheapest fuel near them and ensuring significant reductions in wholesale fuel prices are passed on to customers at the pumps.’
What this means for you: If you’re running a petrol or diesel car, you’ll soon have an easy data point to find the cheapest fuel in your area. The invisible hand of the market should then work to keep prices down.
Bus fare cap
Announced prior to the Budget, the £2 single bus fare cap will end at the end of 2024 and increase to £3. The old cap, introduced in 2022 by the previous government, was intended to help soften the cost-of-living crisis.
Andy Burnham, Mayor of Manchester, has already confirmed the £2 cap will remain in place for the Greater Manchester area. London’s Mayor, Sadiq Khan, has also confirmed the £1.75 cap will remain for London.
What this means for you: If you use the bus, expect the fare to increase. Regular bus commuters will see price rises, but travelcards will still represent value for money.
What does this all mean for you?
Keith Adams, Parkers editor, said: ‘The freeze in fuel duty is welcome as it’s where we most feel the cost of driving, but the news that government is committing £500m to increased spending on road maintenance and improvements and £200m to accelerate EV charger roll-outs in 2025-26 are also heartening. We’ve been calling for improved street charging, and this answers that question.’
He also added: ‘Maintaining long-term tax incentives to purchase electric cars through low first-year VED rates is also welcome, as are the continued supporting of EV-friendly Company Car Tax rates, but I’d dearly love to see some help given to private buyers of new electric cars by the reintroduction of the grants that were phased out in 2023.’
Ryan Gilmore is the Car-Buying Editor at Parkers. Having cut his teeth as our Deputy Commercial Content Editor, he’s a savvy shopper dedicated to helping you when it comes to car shopping.
