Autumn Budget delivers package of electric vehicle incentives and funding
Electric vehicles featured prominently in the Autumn Budget with key announcements on taxation, grants and charge points that have been widely greeted across the EV sector.
Big news was the Government’s reaffirmation of plans to restore the 2030 ICE phase-out, as per its pre-election manifesto and ahead of a consultation.
In the Budget document, Labour said it’s “committed to phasing out new cars that rely solely on internal combustion engines by 2030 and that from 2035 all new cars and vans sold in the UK will be zero emission”.
The document also said EVs were “crucial to decarbonising transport and will support growth and productivity across the UK”.
Chancellor Rachel Reeves also announced that the Government would maintain key tax incentives to purchase electric cars.
These include the continuation of low company car tax rates beyond 2028; the appropriate percentages for zero-emission cars will rise by 2 percentage points for 2028/29 and 2029/30, increasing to 7% and 9% respectively.
The move provides continued support for fleet take-up of electric cars and EV salary sacrifice schemes.
But rates for hybrid vehicles will rise “to focus support on electric vehicles”.
Reeves also revealed changes for vehicle excise duty, announcing that the differential between fully electric and other vehicles will increase in the first-year rates of VED from April 2025. Zero-emission cars will pay the lowest first-year rate at £10 until 2029/30.
Labour also said it recognised the need to review the upcoming expensive car supplement for EVs under vehicle excise duty and would consider raising the threshold for zero-emission cars at a future fiscal event “to make it easier to buy electric cars”.
The Chancellor also extended 100% First Year Allowances for electric cars and charge points for a further year.
Other key measures included investing over £200m in 2025/26 to accelerate EV charge point rollout, including funding to support local authorities to install on-street charge points across England. This will drive growth among the UK’s existing charging network, which currently stands at more than 70,000 public charging devices.
A further very welcome move was the announcement of the continuation of the Plug-in Van Grant for another year, backed by £120m to support the purchase of new electric vans and to support the manufacture of wheelchair-accessible EVs.
The Budget also confirmed long-term funding for growth-driving sectors as part of the Modern Industrial Strategy, including more than £2bn over five years to support the automotive sector ramp up production of zero-emission vehicles.
Reeves also said the Budget confirmed plans to capitalise the National Wealth Fund, which would “invest in the industries of the future, from gigafactories to ports to green hydrogen”. And she announced £2bn of funding for 11 brand-new green hydrogen projects, across England, Scotland and Wales.
However, despite calls from across the sector, the Budget was lacking in measures to specifically tackle private buyer demand for EVs, either new or used, or to equalise VAT on public and home charging.
Budget reaction from the fleet and EV sector
The British Vehicle Rental and Leasing Association (BVRLA) said there was some green shoots of positivity, suggesting that the Government is taking the UK’s transition to cleaner, greener vehicles seriously.
Gerry Keaney, chief executive of the industry body, added: “The confirmation that the fair EV company car tax regime will be continued at least to 2030 is a positive step, supporting a vital contributor to the transition and a bright spot of success up to now. Extending the Plug-in Van Grant provides the sector with a much-needed boost.”
But he continued: “For our sector, the Chancellor has left many challenges unresolved. As penalties to stay in ICE vehicles ramp up in line with the ZEV mandate, more needs to be done.
“The barriers relating to the rental sector, charging infrastructure, consumer education and the used EV market all need close attention.”
Paul Hollick, chair of the Association of Fleet Professionals, said the new certainty around company car tax would maintain the ongoing electrification of car fleets, especially by establishing a marked differential compared to hybrids.
“However, there remains quite a long list of issues that we would like to see resolved in the short to medium term – ranging from 4.25-tonne electric van derogation through to ongoing difficulties surrounding the ZEV mandate,” he went on.
“Conversations covering at least some of these problems are underway and we await their outcome with interest.”
James Lett, technical editor at Autodata, said the decision to maintain the salary sacrifice scheme for electric vehicles was a lifeline for the EV adoption goals of the UK.
“The benefits of salary sacrifice schemes in helping people lease new zero or low-emission vehicles cannot be underestimated.
“This scheme has successfully incentivised both private and fleet drivers to switch to electric vehicles by making them financially accessible for many – especially NHS staff, police forces, and local authorities.”
Lett also said the £2bn to support the automotive sector transition to zero-emission vehicles was a welcome move but said the growth of EVs was limited without skilled technicians to ensure these vehicles are maintained and safely operated. He called for clear incentives and grants to be implemented across the industry in a move to build a workforce capable of meeting the demands of an increasingly electrified market.
Richard Staveley, CEO of EO Charging, said there was a “disappointing and concerning gap in the support needed to help businesses transition to electric vehicles”.
“Access to EVs and reliable infrastructure remains a major barrier to adoption,” he stated. “With net zero targets fast approaching, more support is needed to accelerate the transition to EVs. Commercial fleets are a crucial, yet often overlooked, part of this effort. Transport is responsible for almost a quarter of global emissions, and commercial fleets account for a large proportion of this.
“Transitioning to electric fleets requires significant investment and a comprehensive, business-wide transformation, making government funding essential to support the shift to EVs.”
Zenith greeted the news that Labour has recognised the need to review the expensive car supplement, which disproportionately impacts zero-emission vehicles and has been discussed by the leasing and fleet management specialist directly with the Treasury.
But Ian Hughes, CEO of Zenith’s Corporate and Consumer Divisions, went on: “While there was positive intent, to ensure everyone has access to zero-emission vehicles we need more support to stimulate the used EV market. This is another black hole which the Government needs to fill.”
Lastly, while the fuel duty freeze was generally welcomed, Climate Group had a different take.
Mike Peirce, executive director of systems change, said: “The Chancellor’s decision to continue the fuel duty freeze while not reducing the VAT on EVs is a major missed opportunity to push forward the UK’s transition into a zero-emission transport future and clean air for all. Changes to the first-year tax rates that slightly favour EVs over internal combustion engine (ICE) cars are welcome, but not nearly bold enough to incentive the mass uptake of EVs we need.”
Encouraging signals but more details needed on charging plans
On the infrastructure side, ChargeUK, which represents the UK’s EV charging industry, said there were some encouraging signals that the Government is committed to the UK’s green transport future, but called for more details to give the charging sector the confidence it needs to keep investing at scale.
Vicky Read, CEO of the business group, said: “ChargeUK members have already committed to invest £6bn of private investment to roll out the infrastructure needed to unlock the UK’s e-mobility future, but public funding has an important role to play.
“While frustrating that the £950m Rapid Charging Fund (RCF) was not reconfirmed, we welcome the announcement of £200m of public funding for charge points, which we understand is in addition to the existing Local EV Infrastructure Fund. We look forward to discussing how to maximise the impact of that funding with the Government in due course.
“However, to really supercharge the UK’s transition to EVs and unlock its full economic potential, the Government needs to shore up the £6bn of private investment in charging and ensure that the switch to EVs is affordable for drivers.”
Read added that while the Government turned down the chance to equalise VAT on public and home charging, continued support for the EV salary sacrifice scheme and more favourable vehicle excise duty rates for fully electric vehicles were welcome.
“The Government must now give the charging sector the certainty it needs by confirming that strong ZEV sales trajectories sit at the heart of its decarbonisation agenda,” she added.
Electric vehicle charging provider Konect however said the Budget fell “woefully short” on Labour’s aims to accelerate the rollout of infrastructure.
Om Shankar, general manager and vice president at Konect, said: “We need a 500% increase in public EV chargers between now and the end of the decade to meet our stated goals and projected EV demand.
“Consultation is one thing, but sooner or later the Government needs to show its hand. Some urgent action and lateral thinking on location of charge points and support for operators is needed.”