Budget: What’s been done to encourage a switch to EVs?

In terms of facilitating a transition to electric vehicles  in the UK, yesterday’s budget was something of a curate’s egg.

As we’ve mentioned elsewhere, there was widespread disappointment among environmental and health groups that fuel duty was held back yet again but what was done to encourage a move away from the internal combustion engine? 

The budget contains the following commitments which aim to decarbonise the transport sector:

• Investing over £200 million in 2025-26 to accelerate the rollout of electric vehicle charging infrastructure, including funding to support local authorities to install on-street charge points across England.
• Providing £120 million in 2025-26 to support the purchase of new electric vans through the plug-in vehicle grant and to support the manufacture of wheelchair-accessible electric vehicles.
• Extending the Advanced Fuels Fund for a further year to support the producers of sustainable aviation fuel.

However, it’s one thing to make using EVs more convenient but to accelerate the transition, the alternatives need to become less attractive. So has that happened?

Colin Walker, Head of Transport at the Energy and Climate Intelligence Unit, expressed satisfaction with the increase in first year excise duty on new petrol and diesel cars: ‘Any car that produces more than 76g CO2/km (which is pretty much all non-hybrid petrol & diesel cars) sees the the VED paid on it in its first year doubled. This will only serve to make the lower lifetime ownership costs of an EV compared to a petrol car even more pronounced.’

Furthermore, the Government have said they will consider raising the threshold for the current Expensive Car Supplement for electric cars. Currently cars of any type costing over £40,000 when new are liable for an extra £410 a year VED charge for five years after registration.

Colin was also pleased to see that preferential Benefit-in-Kind rates for EVs will be extended to 2030: ‘This basically means the BiK rates you pay if getting a car through your company, or on salary sacrifice, will remain much lower for EVs than other cars.’

The £2bn to support the car industry in shifting production to EVs is also significant. As Colin said: ‘A report we recently commissioned from the CBI showed that the future of the UK’s car industry hinges on how well it’s supported in making the transition to building EVs.’

On the downside, the fact that there has been no reduction in VAT on public charging from 20% to 5% is disappointing. Groups like Fair Charge have been campaigning for this for some time and such a move would, as Colin says, ‘have removed the currently discrepancy in which VAT on charging at home is four times lower than VAT on using public chargers. This discriminates against those who don’t have driveways – typically poorer families.

‘It would only have cost the Treasury around £71m to introduce – a drop in the ocean compared to the £3bn it will lose by keeping the fuel duty freeze in place.

Another negative remains the fact that, as of 2025, EV owners will have to start paying vehicle excise duty of £190 from a car’s second year onwards, ‘while old small-ish diesels, registered before 2017, will still be paying as little as £20 a year. It’s a bit of a discrepancy to have old clunkers, emitting lots of CO2 paying less in VED than new EVs emitting none. This undermines a system of vehicle taxation that’s meant to be based on a vehicle’s CO2 emissions and reduces the incentive to move to an EV.’

Other industry figures have also offered their opinions: 

Richard Staveley, CEO, EO Charging:

‘This Government’s inaugural budget presented a crucial opportunity to advance sustainability targets. The bar must be set high, as the UK’s Net Zero Mandate ranks among the world’s most ambitious climate targets. This budget reveals a disappointing and concerning gap in the support needed to help businesses transition to electric vehicles (EVs).

‘Access to EVs and reliable infrastructure remains a major barrier to adoption. With net-zero targets fast approaching, more support is needed to accelerate the transition to EVs. Commercial fleets are a crucial, yet often overlooked, part of this effort. Transport is responsible for almost a quarter of global emissions, and commercial fleets account for a large proportion of this.

‘Transitioning to electric fleets requires significant investment and a comprehensive, business-wide transformation, making government funding essential to support the shift to EVs. Without direct support for electrification costs and the extension of initiatives like the Zero Emission Bus Regional Areas (ZEBRA) scheme—while avoiding cuts to other electrification programs—achieving Net Zero goals will be unattainable.

‘Political leaders can, and must, commit to a robust funding strategy that transcends local politics, creating a stable environment for fleet operators to transition to EVs. Exploring alternative funding models—such as Scotland’s direct-to-operator approach, which streamlines processes and empowers fleets to allocate resources effectively—could be a viable solution.

‘Additionally, there is much to learn from China’s EV mandate, despite its criticisms. Ultimately, the new government needs to develop and implement a strategy that addresses the challenges of EV adoption and commits to long-term funding to achieve the UK’s net-zero goals.’

Om Shankar, General Manager & Vice President, Konect:

‘The government has previously stated its aim to accelerate the rollout of electric vehicle charging, but the budget falls woefully short in this area.

‘We need a 500% increase in public EV chargers between now and the end of the decade to meet our stated goals and projected EV demand.

‘Consultation is one thing, but sooner or later the government needs to show its hand. Some urgent action and lateral thinking on location of charge points and support for operators is needed.’

Russell Olive, UK Director of vaylens, the EV charging brand of the KOSTAL Group:

‘The decision not to make it more expensive to run petrol and diesel cars holds us back from making real progress in the decarbonisation of UK transport. This could have been a fiscal incentive to spark interest in switching to electric vehicles among leasers’ and private buyers.

‘Of course, increasing the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty is a step forward. But it is not enough to drive real change.

‘The £2bn investment in the automotive sector should be focused on how we deliver a seamless EV driving experience. This will require additional charging points and charging infrastructure to be underpinned with robust charging management systems that manage the performance of charging stations and streamline payments to successfully support a mass market transition.’

Kieran O’Regan, Co-founder and COO of About:Energy:

‘Maintaining tax incentives for EV purchases and providing over £200 million to accelerate public charging infrastructure rollout demonstrates the government’s ongoing focus on enabling wider consumer adoption of zero-emission vehicles. Importantly, the budget also recognises the strategic importance of building up the UK’s battery manufacturing capabilities. With dedicated funding for gigafactories and additional support for automotive R&D, the government is taking steps to nurture the country’s ecosystem. Sustaining this level of investment will be crucial for the UK to solidify its position as a leader in electric mobility.’