Chancellor Rachel Reeves has delivered a brutal blow to millions of motorists across the UK, confirming significant increases to car tax in her Autumn Budget statement.
Key Changes to Vehicle Excise Duty
The Chancellor announced that Vehicle Excise Duty (VED) for petrol and diesel cars will increase in line with inflation, with the new rates coming into force from April 2026. This marks a significant shift in how traditional motorists will be taxed for vehicle ownership.
During her Budget speech, Ms Reeves outlined how the government views motoring taxation as a critical source of funding for public services and road infrastructure. The Budget document explicitly stated that this approach ensures continued investment in the upkeep of Britain's roads.
Electric Vehicle Tax Revolution
In a separate but related development, the Office for Budget Responsibility (OBR) accidentally released its forecast early, revealing plans for electric vehicle taxation. The report, which was quickly deleted but not before being seen, confirmed that EV drivers will face a pay-per-mile charge from April 2028.
According to the leaked OBR document, battery electric car owners will pay 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. These rates will increase annually with Consumer Price Index inflation. This means a journey between London and Edinburgh could cost EV drivers up to £12 in additional charges.
Broader Impact on Motorists
The Chancellor's announcements represent a fundamental restructuring of motoring taxation in Britain. The government explained that driver taxation has historically been based on two pillars: taxation on vehicle usage through fuel duty, and taxation on vehicle ownership through annual VED.
Ms Reeves also confirmed that Heavy Goods Vehicle taxes will similarly move in line with inflation, affecting commercial transport operators across the country.
The Budget included measures to support consumers choosing electric vehicles and to bolster British automotive manufacturers, with immediate support across both the tax system and additional spending.
These changes come as the government seeks to offset lost revenue from fuel duty as more drivers transition to electric vehicles, while ensuring all road users contribute fairly to maintaining the UK's transport infrastructure.
