What the Autumn 2026 budget means for motorists

Chancellor John Healey delivered his first budget on Wednesday 28 October, 2026. Which of the announced changes will affect car owners and drivers the most?

Fuel duty has been frozen until July, 2027

It was announced that the freeze on fuel duty has been extended until July, 2027. This means it will stay at 52.95p for the 17th consecutive year. Auto Express reports it is set to rise to 57.95p, but it yet to be confirmed if this will happen in 2027.

Despite the RAC's research finding nearly two in three regular drivers wanted a cut to duty of fuel VAT, this will not happen after this budget.

More details on electric vehicle excise duty

Last year, previous Chancellor Rachel Reeves announced a new electric vehicle excise duty from April 2028, explaining: ‘This will be payable each year alongside vehicle excise duty at 3p per mile for electric cars and 1.5p for plug-in hybrids.’

It applies to all battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). What Car? claims this will cost an EV driver who covers 10,000 miles a year an extra £300 and PHEV driver £150.

Reeves claimed this mileage-based EV tax would enable the government to double road maintenance funding and spend £200 million on more electric vehicle charging points.

The 2027 autumn budget added the following details:

A mileage estimation tool will launch with the tax, so EV drivers can work out their annual cost.
An opt-in 'eVED Connect' system will use your car's built-in tech to estimate or report your mileage.
An automatic refund system for people who overestimate their mileage, or sell their car mid-year, is due by 2030.

According to the BBC, the government has said it wanted a ‘fairer system for all drivers’ (read Tempcover’s blog post ‘What’s the fairest car tax option’) and were keen to stress fuel duty only covers petrol and diesel vehicles.

Cheaper home charging on the way?

The temporary cut to VAT on household electricity (from 5% to 0%) has been extended until July, 2027. The Chancellor claims this will take £50 off the annual energy price cap.

VAT will stay at 20% for public charging, with the government planning to spend £100 million over the next two years to cut the prices at local, lower-powered charging stations.

There was also talk of appointing a 'tariff porting' taskforce that would enable drivers to use their home energy taruff at some public chargers, but details are still to be confirmed.

Road tax rises

Vehicle excise duty rates for cars, vans and motorcycles will rise in line with the Retail Prices Index from next April. This means the standard rate for petrol, diesel and hybrid cars registered on or after 1 April, 2017 will increase from £200 to £205.

Business mileage rates

The tax-free business mileage rate is now 55p a mile for the first 10,000 miles. From April, 2027, the rate above 10,000 miles will rise from 25p to 35p.

The 'luxury car tax'

From April 2026, the price threshold for electric cars under the Expensive Car Supplement rose from £40,000 to £50,000.

New EV buyers now avoid the supplementary £425 per year for the first five years. The lower £40,000 threshold still applies to petrol, diesel, and hybrid models.

The electric car grant has also been confirmed to continue until 2029/30, while it has also been confirmed there is no reduction in public charging VAT (20%).