The Autumn Budget 2026 has introduced several measures that could influence motoring costs, Electric Vehicle (EV) charging and employee car schemes.
For automotive OEMs, dealers and retailers, the most relevant announcements include support with domestic electricity costs, investment to reduce the cost of local public charging, an extended fuel duty freeze and long-term changes to tax-free business mileage rates. The Budget also confirmed increases to the National Living Wage and National Minimum Wage.
You can access the full Budget document here, or keep reading for the key announcements and what they could mean for the automotive sector.
Lower electricity costs could benefit drivers who charge at home
The Government has extended the temporary 0% VAT rate on qualifying domestic electricity supplies in the UK until July 2027. It expects the extension to reduce the annual Ofgem price cap by around £50 from April 2027.
Although the measure applies to domestic electricity generally rather than EV charging specifically, drivers who charge an EV at home could benefit from lower electricity costs.
The Budget also includes a £100 Household Energy Payment for households in council tax bands A to D in England from January 2027.
Lower domestic electricity costs could help support one of the key benefits associated with electric cars: the ability to charge conveniently at home and potentially reduce every day running costs.
Actual savings will vary according to factors including:
- The driver’s electricity tariff
- The efficiency of the vehicle
- Annual mileage
- The proportion of charging completed at home
- Whether charging is scheduled for off-peak periods
Overall, this announcement should be a positive outcome for those who already drive an EV or those who might be considering transitioning to electric.
New support for drivers without access to home charging
The Budget didn’t reduce VAT on public EV charging. Instead, the Government announced measures focused on reducing the cost of local, lower-powered public charging.
A new taskforce will explore whether drivers could use their domestic electricity tariff at suitable local public charge points. As this would take time to develop, the Government has also allocated £100 million over the next two years to reduce the cost of local, lower-powered chargers.
The support is expected to take effect from spring 2027 and save an average of around £150 a year for an EV driver without home charging who charges on-street. The Department for Transport is expected to provide further details over time.
This could make the EV proposition more accessible to:
- Drivers without off-street parking
- People living in flats or rented accommodation
- Those living and working in urban areas
- Used EV buyers who can’t install a home charger
- Drivers who rely on local on-street charging
For automotive dealers and retailers, the announcement could help to support transitioning employees to electric for their car benefit, if that’s the business objective.
Fuel duty support has been extended
The Chancellor cancelled the planned reversal of the temporary 5p-per-litre fuel duty cut from January 2027. The cut will now remain in place until 1 July 2027, while the planned Retail Prices Index increase has also been deferred until that date.
This protects petrol and diesel drivers from an immediate increase in fuel duty at a time when forecourt prices remain under pressure.
However, vehicle cost comparisons shouldn’t be based on fuel or electricity prices alone. A useful whole-life cost comparison can include:
- Vehicle acquisition or funding costs
- Fuel or charging costs
- Vehicle Excise Duty
- Company car tax, where applicable
- Insurance and maintenance
- Estimated annual mileage
- Access to home, workplace and public charging
- Any future mileage-based charges
The most appropriate vehicle for any driver will continue to depend on individual circumstances, including mileage, charging access, tax position and practical requirements.
Tax-free business mileage rates made permanent
The increase in the Approved Mileage Allowance Payment rate from 45p to 55p per mile for the first 10,000 business miles was originally announced in May 2026. It took effect retrospectively from 6 April 2026 and initially applied to the 2026/27 tax year.
Ahead of the Budget, the Government announced that the 55p rate would become permanent. This was formally confirmed in the Budget, alongside an increase in the rate applying after the first 10,000 business miles from 25p to 35p per mile from 6 April 2027.
The Government estimates that someone driving 15,000 business miles annually could receive up to £300 in additional tax savings as a result of both increases.
These rates apply when employees use their own cars or vans for eligible business journeys. They’re separate from the Advisory Fuel Rates used for business mileage in company cars.
For businesses, the changes may prompt a review of:
- Employee mileage and expenses policies
- Business travel requirements
- Grey-fleet costs and responsibilities
- The distinction between privately owned and company vehicles
- The potential role of company car and salary sacrifice schemes
National Minimum Wage increases and salary sacrifice
From 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The National Minimum Wage rate for 18 to 20-year-olds will also increase by 3.9% to £11.27 per hour. The Government estimates that the changes will benefit around 2.3 million workers.
The increase is relevant to salary sacrifice arrangements because an employee’s pay after the salary sacrifice must remain at or above the applicable minimum wage.
For employers operating an employee car scheme, the new rates can be incorporated into routine eligibility and affordability checks. This helps ensure employees continue to receive an appropriate choice of vehicles while the scheme remains compliant with minimum wage requirements.
As wages and minimum wage thresholds change, employers and scheme providers can continue to review:
- Employee eligibility
- Post-sacrifice hourly pay
- Vehicle affordability limits
- Changes to working hours or pay
- Existing orders where an employee’s circumstances change
This is a normal part of administering a well-managed salary sacrifice scheme and helps employers offer the benefit responsibly to as many eligible employees as possible.
Electric car salary sacrifice remains an important route to market
The Budget didn’t fundamentally change the tax treatment of electric car salary sacrifice.
Eligible employees can continue to exchange part of their gross salary for an electric car, potentially making Income Tax and National Insurance (NI) savings on the salary exchanged. Benefit-in-Kind (BiK) tax remains payable, and employers may also make savings.
For OEMs, dealers and retailers, electric car salary sacrifice can provide access to drivers who may not otherwise have considered or been able to fund a new EV.
Employee car schemes can:
- Generate additional new-vehicle registrations
- Support manufacturer and dealer relationships
- Provide a structured route to market for EVs
- Introduce more drivers to electric cars
- Contribute to the future supply of used EVs
The increase in the National Minimum Wage reinforces the importance of accurate affordability checks, while the wider tax structure means salary sacrifice and company car schemes can continue to play an important role in EV adoption.
Wider EV policy position
While the Budget didn’t substantially change the wider EV policy landscape, it confirmed that Electric Vehicle Excise Duty will proceed from April 2028, with updates to how mileage will be estimated and reported.
Existing electric car BiK rates remain in place, and today’s Budget confirmed that for tax year 2030/31 the BiK rate for company cars will increase from 9% to 10% for zero emission vehicles, rates for cars emitting 1 to 50g CO2/km will increase from 19% to 20%, and all other rates will increase by 1 percentage point, subject to a maximum of 40%.
The Government also plans to respond to the Zero Emission Vehicle Mandate review by the end of 2026, with any changes expected to take effect from the 2027 compliance year.
These developments provide automotive businesses with continued direction, although further details will be needed for longer-term vehicle, supply and customer planning.
What does the Autumn Budget mean for OEMs, dealers and retailers?
The Budget offers targeted support with electricity, public charging, fuel duty and business mileage, while leaving the main structure of EV taxation and salary sacrifice largely intact.
For automotive businesses, the focus should now be on translating the changes into reviewing mileage policies and employee car scheme eligibility where relevant.
Need help with your current scheme? Get in touch with your account manager today.