The new Chancellor of the Exchequer, Rachel Reeves, has delivered her first budget.
Not only was it a first for the new Labour government, but Reeves was the first female chancellor to provide government’s taxing and spending plans in the country’ history.
She certainly didn’t hold back on the drama when it came to her big day, but should the motorist be feeling scared?
As always, the devil is in the detail.

The RAC has been breaking down the figures to reveal the most important changes for car owners and motorists.

Fuel Duty

It was certainly a big surprise that fuel duty will not increase until March 2026 at the earliest.

The 5p duty cut introduced by the previous Conservative Government in 2022 is to remain in place.

Reversing those measures would have added a further 7p to the price of fuel from 1 April 2025.

Fuel duty was widely expected to rise to boost the Treasury, but it will now remain at 52.95p per litre.

In announcing the freeze, Reeves said: “I have concluded that in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people.”

AA president Edmund King said: “In this eve-of-Halloween Budget, the Chancellor has conjured up a treat for drivers.

RAC head of policy Simon Williams said drivers will “breathe an enormous sigh of relief” at the news.

“It’s good to see the Government firmly recognising the importance of the car to millions of households up and down the country”, he continued.

“Eight-in-10 drivers tell us they are dependent on their vehicles for the journeys they need to make, while 70% of commuters who live in rural areas have no other feasible alternatives to get to work beyond taking the car.

“It’s also worth remembering that even as of today 56% of the total price of a litre of petrol is already tax in the form of fuel duty, and the VAT that is charged on top.”

Pay per mile

Many believed this would be the moment a move toward a pay-per-mile road taxation system would be announced.

However, this proved not to be the case, perhaps because of fears that it would be too much for the public to handle, considering the cost-of-living crisis and the huge changes taking place elsewhere in the tax system.

However, this was the first time Vehicle Excise Duty (VED) rates for new cars has been overhauled for many years.

There were significant rises for certain vehicles from 1st April 2025.

According to the Government, the measures have been designed to “strengthen incentives to purchase zero-emission and electric cars.”

It intends to achieve this by “widening the differentials between zero-emission, hybrid, and internal combustion engine (ICE) cars.

VED

The biggest news is the tenfold increase in first-year car tax rates for cars emitting between 1-50g/km of CO2, including hybrids.

These will increase from the current rate of £10 for petrol and diesel cars (or zero for hybrids) to £110. The vast majority of plug-in hybrid cars fall into this band.

Rates for new cars emitting between 51-75g/km of CO2 will increase from £30 (or £20 for hybrids) to £135.

All other rates will double next year, meaning the owner of a new VW Golf 1.5 TSI will pay an extra £220 in the first year.

By contrast, a new BMW X5 M60i will have £2,745 added to the cost of the first-year rate.

As is usually the case, Standard VED rates will rise in line with the Retail Price Index (RPI) for cars already owned.

The Government will “consider raising” the threshold for the current Expensive Car Supplement for electric cars “only at a future fiscal event”.

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.

Furthermore, Benefit-in-Kind tax rates for company cars will remain at 2% until 2026.

From April next year, double-cab pick-ups will also be treated as cars for capital allowances, Benefit-in-Kind taxation, and deduction from business profits.

Filling the holes

Road maintenance will receive a £500 million increase in funding from April 2025, said to culminate in an extra million potholes being fixed annually.

With the roads in such a poor state around the country after decades of underfunding, any help is welcome for local authorities responsible for their upkeep.

RAC head of policy Simon Williams: “This is positive news for drivers as it should enable cash-strapped local authorities to begin the process of improving the quality of their roads.

“But it’s vital councils don’t just use the money to fill potholes as this is unlikely to deliver the long-term benefit drivers so badly want to see. We believe greater use of preventative maintenance is essential. Surface dressing roads at regular intervals is a proven, cost-effective way of ensuring potholes don’t appear in the first place, along with resurfacing the worst affected roads.”

Plugging in

£200 million will also be set aside to invest in the roll-out of further EV chargers across England.

However no measures will be introduced to help accelerate the take-up of electric cars for private buyers, something the Society of Motor Manufacturers and Traders have repeatedly called for.

Subsidies and scrappage schemes to encourage private motorists to take on the move to EVs.

Considering the extra purchase cost of an EV,  this incentivisation tactic has long been called for and is popular in other countries.

Instead, the government has chosen to aid the EV manufacturing base in the UK through more direct support.

A further £2 billion was confirmed for the automotive sector to “support our electric vehicle industry and develop our manufacturing base”.

Pump prices

The Government will also introduce a ‘Pump Watch’ mandatory fuel price publication and monitoring scheme from the end of 2025.

While this has been mooted before, it’s the first time a date has been set.

Under the previous Conservative government, a voluntary code was introduced but failed to gain real momentum and provide a reliable information base for motorists.

RAC head of policy Simon Williams said: “It’s fantastic to see the Government has now said it will introduce the Pumpwatch scheme and fuel price monitoring function by the end of next year as this is something we’ve long been calling for.

“This will help drivers get a fairer deal every time they fill up by enabling them to find the cheapest fuel near them and ensuring significant reductions in wholesale fuel prices are passed on to customers at the pumps.”

Generally for motorists, it seems the motorist has come out relatively unscathed considering some of the predictions.

For the environmentalist lobby and the car manufacturing industry, there is disappointment in not encouraging a faster move to EVs.

Director Steve Gooding said: “Tens of millions of drivers will be breathing sighs of relief.

“We shouldn’t feel too sorry for the Chancellor. She still gets well over half of everything paid at the pumps in a combination of fuel duty and VAT.”

But Hirra Khan Adeogun, co-director of climate charity Possible, claimed freezing fuel duty is “completely the wrong thing to do”.

She said: “Fuel duty will now be frozen for 15 years, while the cost of public transport has gone up and up each and every year.

“This is completely the wrong way around, and we need to move to a system which makes the greenest ways of getting around the cheapest and most convenient.”