Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of tax, including a) Vehicle Excise Duty, b) VAT on vehicle purchases and c) fuel duty on motorists.

Revenue from motoring taxes helps to fund vital public services and infrastructure, including investment in roads and transport. The Government annually reviews the rates and thresholds of taxes and reliefs to ensure that they are appropriate and reflect the current state of the economy, including considering the impact on households and businesses. The Chancellor makes decisions on tax policy at fiscal events in the context of the public finances.

At Budget 2025, the Government made a number of announcements relating to motoring tax. This included announcing continued support for people and businesses by extending the temporary 5p fuel duty cut until the end of August 2026. Rates will then gradually return to early 2022 levels. The planned increase in line with inflation for 2026-27 will not take place, with the Government uprating fuel duty rates by RPI from April 2027. This will save the average car driver £49 next year compared to previous plans.

The Government also announced the introduction of Electric Vehicle Excise Duty (eVED) from April 2028, a new mileage charge for electric and plug-in hybrid cars, recognising that EVs contribute to congestion and wear and tear on the roads but pay no equivalent to fuel duty.

The Government is taking a proportionate approach to ensuring electric car drivers pay an appropriate share whilst remaining firmly committed to supporting the transition to EVs. That is why the rate will be set at 50% of the equivalent fuel duty cost for petrol and diesel cars, and 80% of eVED revenue from the first three years is being reinvested to extend support for EVs and the auto manufacturing industry. This builds on existing generous support, including Company Car Tax incentives.