Drivers face new car tax hikes, HMRC rules and fuel duty updates after Labour’s Budget

GB News has rounded up the most important changes for drivers in Labour’s Autumn Budget.

Fuel duty

One of the first changes announced by Chancellor John Healey was regarding extending the fuel duty freeze.

The Government will cancel plans to add 5p back onto fuel duty from January 2027, and extend the freeze until July 1, 2027.

Since Labour came into power, it is estimated that fuel duty freezes have saved the average car driver £230, the light goods driver £472 and the average HGV driver nearly £4,000.

Budget documents confirmed that the Government would continue to monitor fuel prices over the coming months.

It will also extend the temporary 3.7p-per-litre red diesel duty cut for a further six months, along with the proportional reduction in red diesel duty resulting from the 5p cut to the main fuel duty rate.

Vehicle Excise Duty

Vehicle tax rates for cars, vans and motorcycles will rise in line with the Retail Prices Index from April 1, 2027.

However, a VED exemption for search and rescue vehicles will be introduced through the Finance Bill coming into effect from April 1, 2027.

This was first announced in Rachel Reeves’ Budget in 2025 to benefit search and rescue charities who own eligible vehicles.

The Government has also confirmed that it will extend VED support for heavy goods vehicles.

A reduced annual VED rate of £1 has been available to the majority of HGV licences or renewals taken out between July 1, 2026, and June 30, 2027.

Labour will introduce new legislation to ensure that from October 28, 2026, “where this reduced rate is obtained for more than 12 months, any excess benefit may be recoverable from the vehicle keeper as a civil debt”.

Businesses are also impacted, as the Government will set appropriate Benefit-in-Kind percentage rates for 2030-2031.

These rates will be one percentage point above 2029-2030 rates across all vehicle bands.

Zero Emission Vehicles will rise from nine per cent to 10 per cent, while all other rates will rise one per cent up to a maximum of 40 per cent.

Electric vehicles

The Budget coincided with the publication of the Cost of Public Electric Vehicle Charging Review by Philip New, which analysed how drivers could be held back from investing in EVs due to high charging costs.

Labour announced that it would establish a taskforce to explore allowing drivers to use their domestic electricity tariff at local, lower-powered public charge points.

It also pledged £100million over the next two years to reduce costs for local, lower-powered public chargers.

The changes will come into effect from Spring next year, and save the average EV driver who charges on-street without a driveway around £150 a year.

Mileage rates

Higher tax-free mileage rates will be made permanent as part of the Government’s action to make “everyday fixes” for millions of Britons.

This includes locking in the 55p per mile rate for the first 10,000 business miles and increasing the rate above 10,000 miles from 25p to 35p per mile.

Estimates suggest that a worker doing an average of 6,000 business miles a year will save around £120, while high-mileage drivers travelling 15,000 miles could receive up to £300 in additional tax savings.

Prime Minister Andy Burnham said: “If you’re a nurse driving for work, a parent spending those precious first weeks with your new baby, or an unpaid carer picking up an extra shift, these changes will make life a little easier and put more money back in your pocket.”