Autumn Budget 2025 – industry comment

Today’s Autumn Budget set out the most significant shift in the UK’s tax and investment landscape in over a decade, combining a higher long-term tax burden with targeted incentives aimed at supporting business investment, accelerating the transition to electric vehicles and stabilising the public finances.

Framed by the Chancellor as a plan to “rebuild the economy” through stability, investment and reform, the Budget delivered a mix of revenue-raising measures, extended freezes on personal tax thresholds and new sector-specific support, alongside a substantial package for the automotive and EV transition.

With the OBR confirming slower medium-term growth and a record tax take by 2030–31, today’s announcements will have deep implications for lenders, manufacturers, consumers, fleet operators and SMEs across the UK, setting the stage for a wide spectrum of industry reaction.

Industry reaction and outlook

“While today’s Budget does not go as far as we and our members would have liked, it is clear that the principle of including leasing within full expensing has now been accepted by Government.

“In a challenging fiscal environment, this is a sensible holding position that supports business investment while wider reforms are developed. Leasing plays a critical role in enabling firms to invest in the equipment and technology they need—flexibly, cost-effectively, and in a way that aligns with how businesses choose to manage their cashflow and risk.

“We look forward to continuing our work with HM Treasury and HMRC to deliver the full expensing framework that will maximise growth and ensure firms can access the funding tools that best support their ambitions.”

“Deferring the end of employee car ownership schemes into the next parliament, meanwhile, will be welcomed by workers across the sector.

“Changes to the VED expensive car supplement are welcome, as is the additional £1.3 billion funding for the Electric Car Grant and support for charging infrastructure. These will help, but will not offset the impact of introducing a new electric-Vehicle Excise Duty – the wrong measure at the wrong time.

“Manufacturers have invested to bring more than 150 EV models to market. However, the pressure to deliver the world’s most ambitious zero emission vehicle sales targets – whilst maintaining industry viability – is intense. With even the OBR warning this new tax will undermine demand, government must work with industry to reduce the cost of compliance and protect the UK’s investment appeal.”

“The delay to the suspension of the Employee Car Ownership Scheme is welcome news for UK retailers, while the additional funds allocated to grants to incentivise electric car adoption and improve charging infrastructure are equally good news. However, the new electric pay-per-mile tax threatens to obscure the benefits these will deliver. For consumers and the industry alike, how this tax will be calculated remains a mystery, and the true impact on the total cost of ownership remains unclear. Although the government acknowledges the impact this will have on EV adoption, it is disappointing that the industry will bear responsibility for managing this in line with the ZEV mandate targets.”

“The Office for Budget Responsibility estimates that there will be 440,000 fewer electric cars on the road thanks to the introduction of pay-per-mile charging from 2028. This sends completely the wrong signal as only 130,000 of these sales are offset by moves to make EVs more affordable, such as raising the Expensive Car Supplement from £40,000 to £50,000.”

“In the OBR’s own words, this new charge is likely to reduce demand for electric cars as it increases their lifetime cost. Does she want people to buy electric cars or not?”

“These additional lifetime costs will stack up for consumers, potentially pushing undecided drivers to hold on to their ICE vehicles and prompting some existing EV owners to reconsider their next purchase if more affordable alternatives appear.

“This shift risks slowing the UK’s EV adoption curve and could materially impact how quickly we’re able to meet the Government’s net-zero targets. Long-term policy stability and consumer confidence remain essential if we want the transition to get back on track.”

“In February 2025, we called on the Government to increase the Expensive Car Supplement (ECS) threshold for electric vehicles (EVs) from £40,000 to £60,000 based on data relating to quotable vehicle models.

“While we welcome that the threshold has increased by 25% to £50,000, it doesn’t go far enough based on manufacturers’ huge capital investment to reach the milestones of zero-emission mandate, which will continue to impact the P11D (list price) of the vehicles over the next few years.

“Our (Alphabet) data reveals that, as of 26 November 2025, the average P11D value of 1,090 quotable EV models is £56,633, meaning that the new ECS threshold will still come up short by 13.27% from April 2026. And for 53% of quotable EVs above the £50,000 threshold, the average P11D value equates to £72,437, which illustrates why the threshold needs to shift further to be truly reflective of the market.”

“I suspect that overall, this could have at least some positive effects. There are potential plus points for car buyers in the shape of higher minimum wage, help with electricity bills and increased child benefit, although balanced against that should be the creeping effect of freezing personal tax thresholds. In general terms, consumer confidence has taken many knocks in recent years and there is some worthwhile help here against a tough economic backdrop.”

Helen Thorne, spokesperson for the Leasing Broker Federation (LBF), said: “Although the Chancellor may have given with one hand by increasing the Expensive Car Supplement and extending the Electric Car Grant, she has undoubtedly taken with the other with a new pay-per-mile tax system. It is a strange move given the Government’s own climate agenda and drive for EV adoption – a move that is expected to reduce demand by increasing the cost to own or lease.

“This is likely to have significant implications, whether it’s businesses with high mileage car fleets, or those who currently own or are contemplating buying or leasing an EV. Leasing has long been a key component in driving EV adoption, enabling drivers to dip their toe in the water and access lower upfront and monthly costs without any fears of depreciation or degradation. A move such as this risks slowing the positive progress we have seen so far in the leasing sector. The LBF will continue to represent its members in calling for the smooth transition to any new system, ensuring it is transparent and alive to the needs of both the leasing community and a broad range of motorists.”

“So, it was encouraging to see the Government announce a number of measures which genuinely give a much-needed boost to productivity and future talent pipeline and could be a step towards building an altogether more positive investment environment

“Founders and investors have been very vocal about what changes would be most impactful when it comes to unleashing the growth potential of UK businesses. SMEs of all shapes and sizes want action – and while today we’ve seen the Government take the first few steps, it now needs to follow through on its policy aims to successfully unlock business growth.”

“With 44 percent of SMEs having delayed investment decisions until after the Budget, the absence of meaningful and targeted measures today will further hold back capital expenditure.

“This Budget offered little to ease the pressures SMEs are facing day in, day out. Inflation and rising operating costs remain the most pressing challenge for two-thirds of SMEs, and without intervention to ease this burden, the Government risks stalling their ability to invest in jobs, innovation, and growth. 

“SMEs are the beating heart of the UK economy, and today they needed a signal of confidence. Instead, while this Budget stopped short of harming SMEs, it also stopped short of helping them. For a Government that promised to champion small business growth in its Plan for Change, this is a missed opportunity.” 

“We welcome the support for skills – specifically the commitment to make under-25 apprenticeships free for SMEs. This directly addresses a critical need for mid-sized businesses, with nearly a quarter (23%) telling us they need support with hiring and training. This is a tangible investment in the future workforce and a clear signal of support for growth.

“However, this positive step is overshadowed by persistent cost pressures. The increase in the National Living Wage will immediately squeeze margins, and the new cap on National Insurance relief for salary-sacrificed pension contributions adds another layer of operational cost. This tax change, which 42% of mid-sized companies already feared would negatively impact their business, makes long-term workforce planning and retention more complex. Furthermore, the decision to strip back tax relief for those considering selling their business to Employee Ownership Trusts is a disappointing withdrawal of a key incentive for long-term business stability. 

“While the Chancellor speaks of growth, the core operational demands of mid-sized firms – like relief on energy bills, accessing new markets, and business rates – were not substantially addressed. This Budget ultimately feels like a missed opportunity to truly fuel the ambition and growth potential of the businesses that drive the economy.”

“Whilst these arrangements are often helpful where the employees do not immediately have the funds to acquire the business and to encourage employee ownership, the restrictions to the tax benefits may result in more businesses being sold to third parties in preference to Employee Ownership Trusts.”

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.