Fuel duty, public charging costs and the introduction of pay-per-mile taxation for electric cars are set to be key areas of interest for motor retailers and leasing businesses ahead of the Autumn Budget.
Chancellor John Healey will deliver his first Budget on October 28, with pressure mounting for measures to ease motorists’ running costs and provide greater certainty over the financial case for switching to electric vehicles.
Accountancy firm BDO has identified a potential reduction in VAT on public EV charging among the measures the Chancellor could consider. It also expects an update on the forthcoming mileage charging system. Neither prediction represents a confirmed Budget announcement however.
The decisions will matter for dealers explaining whole-life costs to customers, particularly those considering leases or finance agreements extending beyond April 2028.
Budget 2026: Will the fuel duty freeze continue?
The temporary 5p-per-litre fuel duty cut remains in place until December 31, keeping the main petrol and diesel rate at 52.95p.
Under the current timetable, duty would increase by 3p in January 2027 and a further 2p in March, restoring the rate that applied before the cut was introduced in 2022. The government has said final rates will be confirmed at the Budget.
Tom Preston, chief executive of Hippo Leasing, urged the Treasury to extend the freeze.
“Drivers have faced relentless pressure on their monthly household budgets over the last few years, so extending the fuel duty freeze into 2027 is an absolute priority,” he said. “At a time when everyday costs remain high, drivers need stability at the pumps, not another tax hike.”
Fully reversing the 5p cut would add £3.30 to the cost of filling a 55-litre tank once VAT is included, assuming the increase is passed on in full.
Could public EV charging VAT be cut?
BDO suggests a reduced VAT rate for public EV charging, potentially 10%, is an option for the Chancellor.
Public charging currently attracts 20% VAT. The difference between public and domestic charging will widen from October 1, when a temporary zero rate takes effect for qualifying domestic electricity supplies in Great Britain until March 31, 2027.
Preston said the public charging rate disadvantages households without access to a driveway.
“The people paying more are usually the ones who can least afford it, such as renters and flat-dwellers. Essentially, anyone without off-street parking,” he said.
The issue also remains subject to a legal dispute. Following a tribunal ruling in favour of community chargepoint operator Charge My Street, HMRC applied for permission to appeal. Its stated position remains that public charging attracts the standard VAT rate.
What will the 2028 EV mileage tax mean for drivers?
Electric Vehicle Excise Duty is scheduled to begin in April 2028 at 3p per mile for fully electric cars and 1.5p for plug-in hybrids, alongside existing VED.
At those introductory rates, a driver covering 10,000 miles annually would face an additional £300 charge for an EV or £150 for a plug-in hybrid.
The government has already published its consultation response on Electric Vehicle Excise Duty, including a decision against requiring additional mileage checks for cars under three years old.
It has also outlined simplified arrangements for fleets and leasing businesses, including estimated mileage readings, bulk licensing and greater payment flexibility.
Any further Budget announcements would therefore build on an existing implementation framework.
Preston said: “Alongside clear guidance on how the 2028 pay-per-mile tax will actually work, this Budget is a critical opportunity for the Treasury to give drivers the transparency they need to plan their long-term motoring costs.”
Ensure you always receive AM insights. Make us a preferred source of news on Google