The Budget and its impact on employer EV schemes

Now we’ve had time to digest its details, how exactly is the Autumn Budget affecting take-up and ownership of EV and hybrid vehicles.

From a motoring perspective, UK Chancellor of the Exchequer Rachel Reeves’s 2025 budget was broadly positive.

She announced a series of measures which will benefit electric vehicle (EV) drivers and which forms part of the government’s sustained push to encourage more people away from internal combustion engine vehicles (ICEVs) - such as petrol and diesel - and towards hybrids or EVs.

These measures included raising the threshold for the expensive car supplement on electric vehicles from £40,000 to £50,000 which is expected to save drivers £440 a year.

Not so popular

In addition, £1.3bn of additional funding for the electric car grant, extended until 2030, has been announced along with a further £200m investment in EV infrastructure such as increasing the number of EV charging stations. There will also be a 100% business rate relief for EV charge points for the next ten years.

However, there were a few less-popular introductions for those choosing to drive an EV, or thinking of driving one in the future. The new policy to introduce a 3p/mile for EV drivers and 1.5p/mile for hybrid users has been met with less enthusiasm.

There have been concerns that the new mileage-based charge – seen by many as counter intuitive, as it will affect the take-up of EVs in 2026. But let’s look at the numbers here:

The average annual car mileage is between 7-10,000 miles, according to NimbleFins. That’s around £200-£250 a year increase which equates to between £16-20 a month. Frustrating, but not an exorbitant increase.
It’s also going to become necessary. EVs are heavier than ICEVs and will create additional burden on Britain’s roads. The proposed 3p/mile charge funds pothole repairs and general wear and tear – something from which everyone benefits.

Early stages

It’s also important to remember that this proposal is only at the initial stage and is open to industry consultation until the Spring as one of the main queries is exactly how the charge can be measured and levied.

Whatever happens, it isn’t expected to come in until 2028. So for the next twenty-four months at least, EV and hybrid users will not see a mileage-based charge.

Currently – and even if the 3p/mile is eventually introduced – EV salary sacrifice schemes remain one of the most affordable and effective ways to improve employee financial wellbeing. These schemes create significant tax and NI savings because a proportion of an employee’s salary is taken before tax, therefore reducing their tax liability.

In addition, it’s a fixed monthly cost, enabling employees to budget effectively without any unexpected surprises.

Given that the average annual cost of running a car is now 8% higher since 2020 according to NimbleFins, the fixed monthly cost of EV salary sacrifice schemes which includes tax, insurance and maintenance provides additional peace of mind.

EVs gaining in popularity

So what are we likely to see going into 2026? And how will the budget proposals impact EV take-up?

Interest in EVs has really ramped up over the past two or three years, so it’s likely this trend will continue into 2026 and beyond, particularly as organisations and businesses are continuing to work towards the Road to Zero strategy 2030.

The new announcements, such as the increased threshold for the expensive car supplement and the extension of the electric car grant, will certainly help.

There could also be increased interest in hybrid vehicles. Consumers are interested in EVs but not everyone is ready to make the switch just yet – hybrids are effectively a transition vehicle that allow drivers to get used to the onboard electrification before making the full switch to EV.

Yet according to Tusker’s EV Driver Survey, the majority of people who have made the switch do not go back to petrol or diesel cars. Just 3% of EV drivers on a Tusker scheme say they would return to a petrol or diesel vehicle, while 96% said they are either ‘satisfied or very satisfied’ with their EV.

It’s clear that EV salary sacrifice schemes give employees access to vehicles they otherwise would not be able to afford.

As ‘range anxiety’ becomes a thing of the past thanks to increased investment in charge points – including rapid chargers - and general EV infrastructure, the main remaining barrier to EV ownership is cost. And EV salary sacrifice schemes are an effective way of mitigating this.