The Budget: a Tax-Raid on Workers and New Costs for EV Drivers

The Budget and Your Wallet: A Tax-Raid on Workers and New Costs for EV Drivers

The Chancellor’s November 2025 Budget, as detailed by the OBR and reported by the BBC, sets the path for the UK economy for the rest of the decade. For everyday working people, the measures are a contradictory approach: some targeted help, but a significant, persistent increase in the personal tax burden, including a new bill for EV and plugged in hybrid drivers.

1. The Invisible Budget Tax Hike: Fiscal Drag Until 2031

The most profound financial shift for most workers is the extended freeze on personal tax thresholds.

Instead of raising the amount of money you can earn before paying the basic and higher rates of tax, the Chancellor has frozen these bands until 2031—three years longer than previously planned.

• The Effect: This policy, known as fiscal drag, means that as you receive inflationary pay rises, a larger proportion of your income is pulled into tax (or into the higher 40% tax bracket). For the average worker, this is the main driver pushing the UK’s tax burden to a projected record high, offsetting the benefit of any wage rises.

2. Your Commute: New Costs for Electric Drivers

Motoring has been a key target for revenue replacement in this Budget, particularly as the government seeks to plug the gap left by falling fuel duty revenues. This affects both petrol/diesel and electric car drivers.

The New EV Mileage Charge (From 2028)

The Chancellor confirmed a new usage-based tax for zero-emission vehicles in the budget:

• The Charge: From April 2028, electric car drivers will face a new “Electric Vehicle Excise Duty” (eVED) of 3p per mile. Plug-in hybrid drivers will pay a reduced rate of 1.5p per mile.

• The Cost: For an average EV driver covering 8,500 miles annually, this equates to around £255 extra per year in the first year. This charge is designed to be around half the equivalent rate paid by petrol and diesel drivers through fuel duty, but it represents a fundamental new cost for green motorists.

Budget Tax Relief for EV Buyers (From 2026)

In a measure designed to soften the blow and encourage the transition to greener cars, the Chancellor offered a temporary tax break for new buyers:

• Expensive Car Supplement (ECS) Threshold Raised: From April 2026, the threshold for the ‘Luxury Car Tax’ (the Expensive Car Supplement on VED) will be raised for electric vehicles from £40,000 to £50,000. This makes a wider range of mid-to-high-spec electric cars cheaper to run by removing the £425 annual VED surcharge for many models.

Fuel Duty: A Temporary Reprieve

For drivers of petrol and diesel cars, the Budget announced a continued freeze on fuel duty, but only until September 2026. After this date, the ‘temporary’ 5p cut introduced in 2022 will be reversed in a staggered approach, meaning fuel costs will begin to rise again from late 2026.

3. Targeted Support: Wins for Low-Paid and Families

The Budget did include some crucial increases in support for those on the lowest incomes:

• Minimum Wage Increase: From April next year, the National Living Wage (NLW) for eligible workers aged 21 and over will increase to £12.71 an hour, providing a substantial pay rise for millions of the lowest-paid workers.

• End of the Two-Child Cap: A major change is the scrapping of the two-child limit on Universal Credit (UC) from April next year, providing a much-needed financial boost to half a million families with three or more children.

4. Savings and Pensions: Less Generous Rules

For those building their long-term financial stability, two notable restrictions were introduced:

• Cash ISA Limit Cut: The amount you can save tax-free each year in a Cash ISA is being reduced from £20,000 to £12,000 for people under 65, aiming to push funds towards riskier, growth-generating investments.

• Salary Sacrifice Cap: From April 2029, a cap of £2,000 a year will be placed on the amount an employee can contribute to their pension via a salary sacrifice scheme without facing National Insurance charges, primarily affecting high earners.

The November 2025 Budget is defined by trade-offs. While the government provides necessary relief to the lowest-paid through the National Living Wage and Universal Credit changes, it simultaneously increases the tax burden on the majority of working people through fiscal drag and introduces a significant new cost for the growing number of EV drivers.

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