Autumn Budget 2025: a high-tax reset with a push on EV transition

The 2025 Autumn Budget will be remembered for the moment when the Office for Budget Responsibility (OBR) accidentally released its full economic forecast online hours before the Chancellor delivered her statement.

Rachel Reeves called the leak “deeply disappointing” and noted that the OBR had taken “full responsibility.”

Despite the disruption, the Chancellor stressed that her Budget was focused on “rebuilding our economy,” supported by new international trade ambitions and a long-term commitment to stability, investment and reform.

The Budget represents a significant rise in taxation, much of it delivered through stealth: extended freezes to income tax thresholds, higher taxes on investment income and new levies on property and pensions. According to the OBR, the Budget will raise £26bn a year by 2029–30, pushing the UK tax burden to a historic 38 per cent of GDP by 2030–31.

Reeves insisted that these measures deliver fiscal responsibility, raising the government’s headroom from £10bn to £21.7bn and reducing the risk of further short-term adjustments in future Budgets.

Income tax thresholds will remain frozen until April 2031, meaning millions will be drawn into higher tax bands. A new annual tax on homes worth over £2m will be introduced from 2028, and salary-sacrifice pension contributions above £2,000 will be subject to National Insurance from 2029. Meanwhile, the two-child benefit cap will be removed from April 2026, and cuts to green levies on energy bills aim to provide some immediate household support.

For business, the Budget maintains the government’s earlier commitment to a competitive 25 per cent corporation tax rate, full expensing for plant and machinery but no extension to leasing or to cars, and a flexible regime for intangible assets. However, from April 2026 the main writing-down allowance will fall to 14 per cent, partially offset by a new 40 per cent first-year allowance from January 2026 to encourage investment.

Firms will also welcome clarity that reforms to Employee Car Ownership Schemes (ECOS), originally planned for 2026, will be delayed until April 2030 with transitional arrangements lasting until 2031.

Economic forecasts show a mixed picture: the OBR upgraded growth for this year to 1.5 per cent but downgraded expectations for 2026–29, citing weaker productivity. This downward revision is expected to reduce tax revenues by £16bn by the end of the decade.

The EV transition: incentives, infrastructure and industry support

One of the most detailed and strategically significant parts of the Budget concerns the transition to electric vehicles. Although the new electric vehicle duty will introduce mileage-based charges for electric (3p per mile) and plug-in hybrid vehicles (1.5p per mile) from April 2028, on the one hand, the government has set out a package of measures, on the other hand, aimed at supporting consumers, strengthening infrastructure and boosting the competitiveness of UK automotive manufacturing.

The Electric Car Grant, which has already helped more than 35,000 motorists switch to electric vehicles by providing up to £3,750 towards the purchase of eligible models, will be extended until 2029–30 and expanded with an additional £1.3bn of funding. To make EV ownership more affordable, the threshold at which new electric vehicles incur the Vehicle Excise Duty Expensive Car Supplement will increase from £40,000 to £50,000 from April 2026.

The government is also delaying changes to the benefit-in-kind rules for Employee Car Ownership Schemes until April 2030, providing certainty for employers and additional time to prepare, with transitional arrangements running to April 2031.

Support for UK automotive manufacturing is being strengthened through a major expansion of the Drive35 programme, which will receive a further £1.5bn of funding, bringing the total investment to £4bn over the next decade. This programme is designed to ensure that the UK remains competitive in next-generation zero-emission technologies and can play a leading role in global automotive supply chains.

Revenue from the new electric vehicle duty (eVED) will be reinvested directly into road maintenance. By 2029–30, the government will commit over £2bn annually for local authorities to repair and improve roads, doubling current funding and enabling the repair of millions of additional potholes each year.

Charging infrastructure receives a boost as well. An additional £100m will be invested to expand the EV charging network, building on the £400m announced at the 2025 Spending Review. This includes support for home and workplace chargepoint installation, building on the million already in place. A further £100m will help local authorities train and deploy specialist staff to accelerate rollout of public chargepoints.

For households without driveways, the government will consult on simpler planning rules for cross-pavement charging, aiming to reduce the cost and difficulty of accessing home charging. This supplements a £25m scheme announced earlier this year to help councils provide discreet cross-pavement channel solutions for residents.

Businesses will benefit from a 10-year, 100 per cent business rates relief for eligible EV chargepoints and EV-only forecourts, alongside an extension of full first-year allowances for zero-emission cars and chargepoint infrastructure.

Finally, recognising concerns about rising public charging prices, the government will conduct a comprehensive review of public EV charging costs in 2026, examining energy pricing, cost drivers and options for reducing costs for consumers.

Industry reaction and comment on the Autumn Budget 2025 can be found here.

To understand what this means for your business, register now for the AFC post-Budget webcast, in association with Shoosmiths.

The webcast will explore how the Budget’s decisions – from changes to capital allowances to EV incentives and pay-per-mile reform – will shape funding costs, pricing, product design and risk appetite across auto, asset and equipment finance. You’ll also hear the FLA leadership’s perspective on the policy direction, capital rules, investment incentives and regulatory expectations, as well as what firms should prepare for over the next 12–18 months.

Speakers include AFC’s David Betteley, John Phillipou and Simon Goldie from the Finance & Leasing Association, and Wayne Gibbard from Shoosmiths.