Tomorrow’s Budget is the first under Andy Burnham’s government, and it lands as diesel sits at record prices. The RAC says the average litre of diesel passed £2 at the start of October for the first time, beating the previous record set in 2022, and filling a family car’s tank now costs about £110.
Some measures for drivers have already been announced, while others are only rumours. Here’s where each one stands.
Mileage rate for business drivers
This one is confirmed. If you drive your own car for work, the tax-free rate you can claim went up from 45p to 55p a mile for the first 10,000 miles in May, backdated to April. It was the first rise since 2011.
The government says it will now make the 55p rate permanent and raise the rate for miles beyond 10,000 from 25p to 35p. The Treasury says around three million employees and self-employed people will benefit.
Will fuel duty be frozen again?
Fuel duty has been held at 52.95p a litre since 2022, thanks to a temporary 5p cut. That cut has been extended several times, and it’s currently due to end in stages, with 3p going back on in January and another 2p in March.
The BBC has reported that the Chancellor plans to freeze fuel duty again and keep the 5p cut, but this hasn’t been confirmed. The AA has gone further and called for another 5p cut, while accountancy firm BDO wants the January rise scrapped. With diesel at record levels, we’d be surprised if the increases went ahead in January.
Will public EV charging get cheaper?
Drivers who charge at home pay a lower rate of VAT on their electricity than those using public chargers, which pay the full 20%. That hits drivers without a driveway hardest.
In January, the Telegraph reported that the Treasury was looking at cutting VAT on public charging, partly to soften the blow of pay-per-mile tax. The government has only said it is reviewing the cost of public charging. Even if VAT is cut, it will only help drivers if charging companies pass the saving on.
What about pay-per-mile tax?
Electric vehicle excise duty is already confirmed and starts in April 2028. Electric cars will pay 3p a mile and plug-in hybrids 1.5p a mile, on top of normal road tax, with the rates rising in line with inflation from 2029-30.
The government has also set out how mileage will be counted. Drivers can either let their car’s connectivity report mileage automatically, or declare it each year when they renew their road tax, with readings checked at the MOT. Some details are still to come, including how plug-in hybrid mileage will be policed, so the Budget could fill in a few gaps.
Could there be a heavy car tax?
This is the wildcard. The Conservatives claim the Chancellor is considering a weight-based tax on new cars, based on a plan from campaign group Transport & Environment. That plan would charge £10 for every kilo over 1,600kg, or 2,000kg for electric cars. It would only apply to new cars at their first registration, and the Treasury hasn’t commented.
Our verdict
The fuel duty freeze is the most likely good news for drivers. With diesel above £2 a litre, we’d be surprised if the Chancellor let the January rise go ahead. The mileage rate change is already in the bag for anyone who drives for work.
The two to watch are a VAT cut on public charging, which would help EV drivers without a driveway, and the heavy car tax, which would hurt anyone buying a big new SUV next year. We’ll update this story as soon as the Chancellor sits down.
Whatever changes tomorrow, Regit’s free Digital Garage keeps your tax, MOT and running costs in one place, so set up your free Digital Garage and you’ll get a reminder before anything’s due.