With the price of a barrel of Brent Crude hitting $115 this week, the squeeze on motorists is in full swing. So did the budget announced today offer any signs of relief? We break down today’s announcements for our readers, plus what was not announced.
Fuel Duty
The temporary 5p per litre cut in fuel duty, that originally launched in March 2022, has been extended until 01 July 2027. Whilst it doesn’t cut costs for motorists, the Government is not adding additional cost pressures yet.
Fuel Duty remains at 52.95p per litre, with VAT added onto the whole pump cost which includes the fuel duty.
The 3.7p per litre cut in the rebated rate of red diesel is also extended to 01 July 2027 which should support famers and rail freight operators, and was first implemented in the summer.
Vehicle Excise Duty
VED rates for cars, vans and motorcycles will rise inline with RPI inflation from 01 April 2027 with no further changes to the VED system announced.
There’s also been no changes to the Benefit-in-Kind rates, or the planned eVED (pay per mile) charges that will be levied against plugin-hybrids and electric vehicles scheduled for rollout in April 2028. Although, rumours circulating prior to the budget about changing VED to a vehicle weight were unfounded.
HGV Vehicle Excise Duty
The temporary £1 VED rate for most heavy goods vehicles is also extended until 30 June 2027. This has often been referred to as the road tax holiday, but offers businesses a little relief, albeit the majority of the costs will be from diesel bills, with costs remaining stubbornly high.
Approved Mileage Allowance Payments
The increase from 45p to 55p per mile for the first 10,000 business miles is made permanent after it was first introduced earlier in 2026.
The rate above 10,000 miles rises from 25p to 35p - which should help towards softening the fuel cost blow and that should benefit around 3 million people using their own car for business. That saves up to £126 per year for someone covering 6,000 business miles, or £300 for someone covering 15,000 business miles.
EV Charging
The removal of VAT on domestic electricity tariffs continues through to July 2027, however, for EV drivers using 2,000 kWh of electricity from their home, the savings on a typical EV tariff are around £8 per year.
However, the real cost is from public rapid chargers where the price per kWh varies wildly from retailer to retailer. However, there is an ongoing discussion within government aimed at allowing EV drivers to access domestic VAT rates at public chargers.
The Chancellor said the Government is establishing a taskforce and will make £100 million available, but only to reduce prices from lower-powered public charge points. This does not tackle the expensive public rapid charger costs or the wide gap in pricing between retailers. And this is perhaps holding back mass adoption which further stresses the ZEV Mandate.
This £100M support package will run from 2027-29.
Summary
With motorists experiencing a tight squeeze on budgets due to high petrol and diesel costs at the forecourts, there is little relief in sight.
The VAT receipts alone from the sale of petrol and diesel have increased significantly this year, estimated to be approximately £1.7 bn in 2026 so far, with some analysts forecasting up to £3.9 bn in additional Treasury revenue, the announcements made today might seem like a drop in the ocean.
With the cost of motoring reaching record highs, the lack of tangible support for petrol and diesel drivers is perhaps a quiet suggestion by government for motorists to look to the EV Car Grant for financial support. There is both an EV Car Grant up to £3,750 for qualifying cars, and an additional £500 towards the cost of installing a home charger.
What can drivers do to lower costs?
To extract the best value, head over to the Car Leasing Explained guide that demonstrates how to lease a new car, and how that can lower overall costs.
For those who can charge at home, the alternative to substantially lower costs is an electric car, provided customers are aware of dedicated EV tariffs. Head over to our Car Guides & Tools for a Beginner’s Guide to EV Ownership.
Alternatively for more practical tips to reduce the cost of petrol and diesel, head over to our How to Save on Fuel Costs article.
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About the Author
Graeme Cobb is a lifelong car enthusiast with a passion for writing about cars, EVs, industry updates and more.
You can find Graeme on 𝕏 at @graeme_cobb
