Fuel Prices Surge and Taxes Increase in Rachel Reeves Budget Impacting Drivers

Chancellor Rachel Reeves recently announced significant changes to fuel duty and taxation on electric vehicles in her latest Budget statement. These adjustments will impact drivers across the UK, as they address rising costs and shifting consumer habits.

Key Budget Announcements

The Chancellor confirmed that the freeze on fuel duty will remain in effect until September 2026. However, this extension is set against plans to end the temporary 5p per litre duty cut introduced during the pandemic, which will be lifted in April 2027. Following this, fuel duty rates will be adjusted annually according to inflation metrics.

Fuel Duty Changes

• The current freeze on fuel duty extends until September 2026.
• The temporary 5p cut will conclude in April 2027.
• Annual increases tied to the Retail Price Index (RPI) will begin afterward.
• Fuel duty rates have not been raised since April 2010.
• VAT of 20% applies to the total fuel price.

Edmund King, president of the AA, welcomed the continued 5p duty cut but cautioned that drivers should prepare for inevitable increases starting next year. In contrast, Simon Williams from the RAC noted that the relief would be short-lived for motorists.

New Electric Vehicle Taxes

In light of the growing shift towards electric vehicles (EVs), the government will introduce new taxes. Starting in April 2028, drivers of battery electric cars will incur a 3p per mile tax, while plug-in hybrid vehicle owners will face a charge of £0.015 per mile, which will increase each year based on the Consumer Price Index (CPI).

• Estimated annual cost for average EV drivers (8,500 miles) in 2028-29: £255.
• Decrease in fuel duty revenue expected as more drivers transition to EVs.

Concerns Regarding EV Policies

The Office for Budget Responsibility (OBR) has expressed that the new taxes could reduce electric car sales by around 440,000 units, indicating potential financial implications for the EV market. Howard Cox from FairFuelUK criticized the government’s dual taxation approach, arguing it disincentivizes driver engagement with electric vehicles.

In response to the announcements, Ginny Buckley of Electrifying.com called the government’s strategy confusing. She highlighted the paradox of offering purchase incentives while concurrently introducing new taxes for existing EV users. Ian Plummer from Autotrader further condemned the Chancellor’s approach, suggesting that taxing EV drivers sends mixed messages about the future of transportation.

The UK’s evolving fuel and electric vehicle tax landscape poses challenges for both current and prospective drivers. As the government seeks to balance fiscal needs with an encouragement of greener transportation options, ongoing dialogue with stakeholders remains vital.