At the same time the Chancellor announced a controversial pay-per-mile tax on electric vehicles, she’s sought to keep demand ticking over by announcing new incentives for zero emission cars.
The headline motoring announcement in the Autumn Budget is that electric cars will be subject to a 3p pay-per-mile tax from 2028. It will cost the average EV driver covering 10,000 miles a year an extra £300 annually.
The scheme has been been termed ‘regressive and short-sighted’ by industry players, with the OBR warning that there will be over 440,000 less EVs on the roads because of the road pricing policy.
To balance this out and maintain the government’s 2035 deadline for all new cars being zero emission, the Chancellor has introduced six ‘carrot’ policies to tempt potential electric car buyers.
These include increasing the Expensive Car Supplement (ECS) threshold within car tax to help more EVs avoid the premium charge, injecting over £1bn into the Electric Car Grant to discount electric cars, and boosting backing for the charging network.
Here we explain each of the new policies designed to encourage motorists to buy new EVs… at least until road pricing comes into force.
The Expensive Car Supplement has been increased from £40,000 to £50,000 which will give relief to premium new EV buyers. The hike to the ECS reflects an average cost of £474 a year for the five years – higher than the current £425 for all vehicles which cost more than £40k
1. Expensive Car Supplement – ‘luxury car tax’ only on £50k-plus EVs
A key measure to still entice people into electric cars is an increase to the Expensive Car Supplement (ECS) – a premium tax within Vehicle Excise Duty (VED).
Buyers of new EVs will see the threshold for the ECS – commonly referred to as the ‘luxury car tax’ – rise from £40,000 to £50,000 in April 2026 (while the £40k threshold for petrol, diesel and hybrid models will be retained).
Despite falling new EV prices in recent months, most electric cars are significantly more expensive than their petrol alternatives.
This saw around seven in ten EVs fall into the ECS bracket under previous rules, which would have seen owners incur a £425 annual charge on top of standard rate VED (£195) for five consecutive years.
Over a third (37%) of all EVs previous escaped the ECS but that’s gone up to over half (51%) – the Polestar 2 is now safe as it costs from £45,160
But increasing the threshold to £50k should seen around half of EVs bought by Britons evade the additional charge.
For a car purchased in 2025-26, the Budget Document revealed that the total ECS cost for premium EVs would be £2,370 over the five-year period.
This suggests the Government intends to hike the current rate of £425 to £474 from next year.
The move will cost the Government £500million in 2030-31.
The ECS was first introduced in 2017, and until April 2025 was only applied to petrol, diesel and hybrid cars priced over £40,000.
The Electric Car Grant has been extended and an extra £1.3bn added to the incentive fund that helps car buyers into cheaper new EVs
2. Electric Car Grant boost of over £1billion to persuade you to buy a cheaper EV
Ms Reeves confirmed that the Electric Car Grant (ECG) – launched in July and gives people up to £3,750 off eligible, new EVs under £37,000 – will be boosted by a further £1.3billion investment to keep it in place until 2029-30.
The new backing adds to the £650million initially pledged to slash EV prices for car buyers.
The Government has said that the ECG has already helped 35,000 people switch to an EV this year.
However there’s criticism as to whether the ECG has yet to actually expand the market for EVs.
Independent transport research organisation New Automotie found that the scheme has yet to expand the market for EVs.
In its study ‘That fuzzy feeling: A first analysis of the impact of the Electric Car Grant‘, it found that 23.8 per cent of new registrations in September were EVs, the same as their share before the Electric Car Grant was announced.
Therefore there was ‘limited immediate impact on overall market share’ and New AutoMotive ‘found little evidence that the grant was encouraging consumers to switch to eligible models overall’.
‘It isn’t yet clear that it’s prompting consumers to consider buying cars that they wouldn’t have gone ahead and bought anyway,’ David Farrar, policy manager for New AutoMotive, said.
3. Expanding the public charging network with £100m investment
An additional £100million will be injected into the rollout of Britain’s electric car charging network, it has been confirmed today as part of Rachel Reeve’s Budget.
This builds on the £400million of funding announced at Spending Review 2025.
It includes funding to support the installation of home and workplace chargepoints, adding to the around one million already installed.
The Treasury will allocate another £100million of funding for local authorities and public bodies to support the training and deployment of specialist staff, accelerating the rollout of public chargepoints.
The Government says these investments will build on the almost 87,000 public chargepoints already available across the country.
The Treasury has confirmed a review into cross-pavement EV charging solutions. Start-up Kerbo Charge offers a solution to electric vehicle owners without off-street parking at their homes that lets them tap into cheaper domestic charging costs without putting pedestrians at risk
4. Financial help to make on-street charging easier
A consultation on Permitted Development Rights is being published to look into ways to make it easier and cheaper for people without off-street parking to charge.
The consultation into cross-pavement EV charging is on top of the £25million scheme announced in July to help local authorities provide discreet cross-pavement channel charging solutions for residents.
5. A look into how public charging costs can be brought down
The Government has said it will review the cost of public EV charging, looking at the impact of energy prices, wider cost contributors, and options for lowering these costs for consumers.
The review will start in Q1 2026 and report by Q3 2026.
Additionally, Ms Reeves will introduce a 10-year 100 per cent business rates relief for eligible EV chargepoints and EV-only forecourts, to ensure that they face no business rates liability.
Furthermore, the government will extend the 100 per cent first year allowances (FYAs) for zero emission cars and EV chargepoint infrastructure by a further year.
Chief executive of EV charging industry association Charge UK, Vicky Read, said: ‘Government has listened to our call to defer business rates on EV charging bays, heading off further costs for charge point operators and their customers. Funding to help local authorities work with our sector to deliver charging for their communities is also welcome.
‘These inclusions send a strong signal to investors that this Government intends to back the charging sector.’
6. EV salary sacrifice left alone – good news for employers and employees
It was suggested that salary sacrifice – a scheme that has been driving EV registrations in recent years by allowing employees to lease a cars through their employer before tax and national insurance contributions – would be reduced.
In other words, the amount you’re allowed to ‘sacrifice’ would have been capped.
Currently standard NI rates are eight per cent and two per cent for high earners, and exceeding the new cap would be subject to these rates.
Salary sacrifice schemes cost the Government around £4billion a year in missed tax revenue.
But the Chancellor has decided not to cap the amount that can be contributed via salary sacrifice without incurring national insurance (NI) in order to claw back revenue for the Treasury – good news for salary sacrifice users.
There was hope that the Chancellor would finally slash public charging VAT after years of industry campaigning. While it could come as part of the public charging review it hasn’t been introduced today
What hasn’t been introduced? Slashing VAT on public charging
There was hope that the Chancellor would finally slash public charging VAT after years of industry campaigning.
Currently it stands at 20 per cent for public EV charging, while home charging is only taxed at 5 per cent.
For comparison, the latest AA Recharge Report for September found the average cost per mile to charge an EV using a domestic tariff is 5.88p per mile.
However, for those without off-road parking facilities, the cheapest option – using a public slow charger offering speeds of up to 8kW – is 11.3p per mile, almost double that of plugging in at home.
A chunk of this is VAT.
While VAT could still be lowered after the public charging cost review this is not certain to happen.
But the industry is still calling for ‘fair taxes for a fair transition’, as it has for years, with VAT reduction at the top of the fair tax list.
Steve Walker, Head of digital content at Auto Express, said: ‘ We would like to see VAT removed from public EV charging to help counterbalance the new levy and ensure the transition to electric remains accessible, especially for those without the ability to charge at home’.
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