The annual budget and Autumn Statement are key moments for car tax policy. Here is what the 2025 budget delivered for road users and what it means for your vehicle tax costs.
VED Rates: No Major Changes
The 2025 Autumn Budget maintained the existing VED structure: standard rate of £190 per year for petrol and diesel cars, £10 for zero-emission vehicles, first-year bands based on CO2, and the £410 premium supplement for vehicles over £40,000. There were no increases to VED rates in 2025 — the freeze continues the policy established in previous budgets.
Fuel Duty: Another Year Frozen
Fuel duty remained frozen at 52.95 pence per litre — the longest freeze in history. The temporary 5p cut introduced in 2022 was made permanent in the 2024 Budget. This is significant for petrol and diesel car owners, as fuel duty represents a much larger annual cost than VED for most drivers. The freeze benefits all vehicle types but particularly those who drive high-mileage.
Company Car BIK: Gradual Increases
The Budget confirmed the planned trajectory for company car BIK rates: the zero-emission EV rate increases from 2% to 5% from April 2027. For 2025-26 and 2026-27, the 2% rate is maintained. This provides certainty for company car planning — businesses and employees can budget knowing the BIK trajectory. The gradual increase rather than a sharp jump reflects government policy to taper EV incentives rather than remove them abruptly.
Capital Allowances: Extended for EVs
The 100% first-year capital allowance for businesses purchasing low-emission vehicles (up to 50g/km CO2) was extended. Businesses can continue to deduct the full purchase cost of qualifying EVs and vans from taxable profits in the year of purchase. This is a significant tax planning tool for businesses and helps maintain the financial case for electric company cars and commercial fleets.
HGV Road User Levy
The HGV Road User Levy was maintained at current rates. The levy on heavy goods vehicles over 12 tonnes has been in place since 2014 and contributes to the maintenance of the strategic road network. Fleet operators continue to pay this charge alongside VED for goods vehicles.
What Was Not Mentioned
The Budget did not announce any concrete plans for road pricing despite ongoing government interest. The Treasury continues to monitor the transition to electric vehicles and the impact on VED revenues. The government has stated it will not introduce road pricing without consulting widely — but no formal consultation has been launched as of the 2025 Budget.