The biggest story for the automotive sector isn’t a single policy line — it’s that the Budget is now done. Markets dislike uncertainty, and consumers dislike it even more. With the Chancellor’s announcements out in the open, households can finally make decisions with a clearer view of their near-term disposable income. That matters because car buying is confidence-led: when people feel unsure about what they’ll have left at the end of the month, they delay big purchases.

That dynamic has been on full display since late October. Across the trade there’s a widely held view — backed up by transaction volumes — that anticipation of tax rises sucked the life out of new and used car demand. And why wouldn’t it? If you fear your tax burden is about to increase, postponing a major purchase is the rational move.

This year was never going to be a “laughing all the way to the bank” Budget for anyone. But the Chancellor appears to have raised additional revenue without hitting most household budgets too hard, whilst also offering a few crumbs on energy and travel costs. 

The net effect for automotive is likely positive in the short term: confidence should improve, and pent-up demand may start to re-enter the market over the coming months.

Fuel duty: frozen until Sept 2026, then staged restoration

Fuel duty has been frozen at current levels until September 2026, with the temporary 5p-per-litre cut from 2022 remaining in place for now and then being unwound in phases from September 2026 onward.

Fuel is always an emotive topic. Motorists make up a substantial portion of eligible voters, so the freeze is a politically safe way to support household affordability.  The gradual restoration looks like a careful attempt to wean drivers off a discount that was introduced to soften the Ukraine-war fuel cost shock — raising revenue later without triggering an immediate backlash.

Mileage-based EV tax (“eVED”): from 2028, a mild breeze not a gale

From April 2028 the government will introduce a pay-per-mile charge on battery-electric and plug-in hybrid vehicles — widely referred to as eVED — at 3p per mile for BEVs and 1.5p per mile for PHEVs. 

This has been a topic of much debate in One Auto HQ.  After doing the maths we have conclude that EVs remain outstanding value on running costs even with eVED in place.  So yes, it’s an unwanted headwind to adoption — but more of a mild breeze than a raging gale.

Our biggest worry is the plumbing.  Taxes like this can be administratively expensive, so collection costs can erode the net revenue gain.  And because the tax is mileage-linked, it may increase incentives for odometer tampering — creating extra risk for used-car buyers and the wider trust ecosystem that underpins residual values.

Luxury Car Tax threshold uplift for EVs: support for new sales and residual values

Better news for EV adoption is the increase in the Expensive Car Supplement (“Luxury Car Tax”) threshold for EVs only to £50,000 from April 2026. 

For cars that would previously have fallen into the supplement, this reduces running costs materially — around £2,550 over seven years by removing the annual ECS charge. This should help new-EV affordability at the margin, but also matters for the used market: supporting residual values when these vehicles arrive in the used market with lower costs of ownership, increasing disposal returns. 

Charging costs review + infrastructure support from 2026

Charging costs will be reviewed beginning 2026, accompanied by an extra £200m to help deliver 300,000 public chargepoints by 2030, plus business rate relief for firms installing chargers.

We see this as welcome and necessary.  Better infrastructure is vital for widespread EV adoption,  but it doesn’t remove the core equity challenge: convenient, cost-effective charging remains a persistent issue for roughly a third of UK households — disproportionately those on lower incomes and without off-street parking.  Over the longer term, this will only be fully solved by technology improvements that deliver longer real-world range and, crucially, much faster charge times.

ECOS: scrappage delayed to 2030 — a meaningful reprieve for supply

One of the quieter but most significant automotive measures is the delay to the proposed scrapping of Employee Car Ownership Schemes (ECOS). What was due to take effect in October 2026 has now been rescheduled to April 2030, effectively giving the industry longer to adapt. 

That matters because ECOS is not a niche perk — it’s a material part of UK automotive supply. These schemes account for around 5% of all new car registrations/production, and through manufacturer programmes they create a vital, predictable pipeline of high-quality, used vehicle stock for franchised dealer networks. The delay protects that in the near-term,  giving manufacturers and retailers longer to shape alternatives without a sudden demand or supply shock.

Conclusion: benign near-term, gradually tougher after Sept 2026

All told, this is a relatively benign Budget for automotive in the near term — the simple clearance of uncertainty may be the strongest tailwind of all. 

Tougher elements are pushed into the future and phased in gradually: fuel duty begins to rise after September 2026, eVED doesn’t start until 2028, and ECOS reform is now parked until 2030.

For now, we’re glad it’s over. The market has been waiting to exhale, and we expect to see more momentum in both new and used segments in the months ahead — before those longer-term headwinds start to build.