UK fleets under pressure: Navigating EV tax increases in the 2025 Autumn Budget

The automotive landscape is shifting dramatically. With new taxes on electric vehicles set to take effect in 2028, businesses across the UK face a critical moment. Understanding impact of the Autumn Budget 2025 on the UK car sector and preparing strategically could mean the difference between thriving and merely surviving in the years ahead.

A New Era for Electric Vehicle Economics

Electric vehicles have long been championed as the cost-effective choice for fleet operators. Lower fuel costs, reduced maintenance, and favourable tax treatment created compelling economics. But the ground is shifting beneath our feet.

From April 2028, battery-electric vehicles will face an eVED charge of 3p per mile, while plug-in hybrids will pay 1.5p per mile. These charges are in addition to existing Vehicle Excise Duty obligations, fundamentally reshaping the financial case for electrification.

Consider a typical delivery business that runs vans covering 28,000 miles annually. Each vehicle now faces an additional £840 in yearly charges. Scale that across a fleet of 100 cars, and you're looking at £84,000 in new operational costs.

The government projects that average drivers who cover 8,500 to 9,000 miles will pay an extra £240 to £270 each year. High-mileage commercial operators face substantially more. Perhaps most tellingly, government forecasts suggest these changes will suppress electric vehicle sales by around 440,000 vehicles over five years, affecting dealerships, manufacturers, charging infrastructure providers, and the entire automotive supply chain.

Understanding the Broader Impact

Fleet operators face immediate pressure to recalculate the total cost of ownership models. Previously, electric vehicles offered electricity costs of 3p to 5p per mile, compared with diesel at 12p to 15p, along with lower maintenance and minimal taxation. The eVED charge of 3p per mile narrows that advantage substantially, particularly for high-mileage applications where the tax burden accumulates rapidly.

Residual values present another serious concern. When buyers know they'll face ongoing mileage charges, they factor this into purchase prices. A three-year-old electric vehicle that previously retained 55% to 60% of its value might now be worth only 50% to 55% of it. Leasing companies, whose business models depend on accurate residual predictions, face particular challenges.

Charging infrastructure providers had planned an ambitious expansion based on projected growth. With hundreds of thousands fewer vehicles expected, utilisation rates drop and investment payback periods extend, particularly for rapid charging networks serving commercial fleets, where installation costs can reach £50,000 to £100,000 per hub.

Responses for Forward-Thinking Businesses

Despite these headwinds, several practical strategies can help mitigate rising costs and protect profitability.

Reassess Your Fleet Mix

Total cost of ownership analysis becomes essential. Compare battery electric, plug-in hybrid, conventional hybrid, and efficient petrol or diesel options across different usage scenarios. Factor in purchase costs, fuel expenses, Vehicle Excise Duty, the mileage charge, maintenance, insurance, and residual values.

For vehicles covering 40,000 miles yearly, the £1,200 in additional charges alone may tip the balance back towards efficient diesel in some cases. Run the numbers carefully for each use case rather than applying blanket policies. High-mileage applications might still prefer electric for specific routes with predictable distances and reliable charging, while variable-mileage roles may benefit from hybrid alternatives.

Optimise Routes and Reduce Mileage

Every mile saved delivers double benefits: lower energy costs and lower tax liability. Modern telematics systems reveal where mileage reductions are possible through dynamic routing, delivery consolidation, and efficient scheduling.

Some operators achieve mileage reductions of 10% to 15% through these approaches, saving £9,000 annually in tax charges alone across a 100-vehicle fleet. Driver training in vehicle-specific efficiency techniques helps too. When charges add up quickly, these operational improvements become increasingly valuable investments that pay for themselves within months.

Explore Shared Mobility Models

Reducing per-vehicle mileage exposure makes financial sense. If three employees can share two vehicles through careful scheduling, you've cut fleet size by a third along with associated costs. Urban delivery operations might consider cargo bikes for final-mile deliveries, micro-electric vehicles in high-density areas, or hub-and-spoke distribution models.

Transform Your Payment Processing Costs

One of the most immediate opportunities for budget relief lies in payment processing. Traditional card payments carry substantial fees that hit automotive businesses particularly hard. A £35,000 vehicle purchase on a credit card can cost £400 to £700 in processing fees alone.

Open banking offers a compelling alternative, cutting payment processing costs by 50% to 90%. That same £35,000 transaction might cost just £50 to £150 through open banking, saving hundreds of pounds per transaction.

These savings extend across vehicle sales, service and maintenance, parts sales, fleet charging payments, rental transactions, and lease instalments. Beyond cost reduction, open banking provides faster settlement (often same-day), reduced fraud risk, and elimination of chargebacks that plague card-based systems.

QR code payments integrated with open banking create seamless customer experiences. For dealerships, service centres, and charging point operators, this streamlines transactions whilst dramatically reducing processing costs.

Pay-by-link solutions offer similar benefits for remote transactions. Send a secure payment link via email or text, allowing customers to complete purchases without physically presenting a card. This suits vehicle deposits, service bookings, parts orders, and fleet management payments perfectly.

For businesses facing new tax pressures and squeezed margins, these payment innovations provide welcome relief.

Adjust Pricing and Engage with Policy

Leasing companies, rental operators, and delivery businesses need pricing structures that reflect new cost realities. Consider mileage-based pricing tiers, per-mile delivery surcharges, and adjusted pricing zones that account for the latest charges.

Company car policies require review as well. The new charges affect which vehicles make financial sense for different employee roles and mileage patterns. Benefit-in-kind calculations and mileage reimbursement policies may need to be updated.

Government consultations on implementation details remain open. Businesses should actively participate to influence final rules on commercial vehicle exemptions, differentiated rates by vehicle type, and phase-in arrangements for existing fleets. Industry associations coordinate collective responses, and your participation amplifies concerns while ensuring policy development takes into account operational realities.

Looking Ahead: Building Flexibility and Resilience

The automotive landscape through 2028 and beyond remains highly uncertain. Government policy may evolve further, technology will continue advancing, and market dynamics will shift. Building flexibility into your strategy protects against these unknowns.

Maintain a diverse vehicle portfolio rather than committing entirely to a single technology. Continue monitoring the total cost of ownership across different fuel types as implementation details emerge. Stay engaged with policy developments and industry forums.

Most importantly, focus relentlessly on operational efficiency and cost control. The businesses that emerge strongest will be those that adapt quickly, optimise aggressively, and embrace new technologies such as open banking, QR code payments, and pay-by-link, which deliver immediate cost benefits.

Budget planning now demands more sophisticated analysis than ever before. Consider every angle: vehicle selection, route optimisation, driver training, payment processing, pricing structures, and policy engagement. Each element contributes to your overall resilience against rising costs.

By reassessing fleet strategies, implementing innovative payment solutions that dramatically cut transaction costs, optimising operations to reduce unnecessary mileage, and engaging constructively with policymakers, UK businesses can navigate these changes successfully. The road ahead may be uncertain, but with the proper preparation and adaptive mindset, your business can remain profitable and competitive.

Take Control of Your Fleet Costs Today

New electric-vehicle charges are coming fast, but you don't have to wait to start protecting your margins. While you reassess your fleet strategy, there's one change you can implement immediately: transforming how you process payments.

Payment solution providers like Wonderful, TrueLayer, GoCardless, etc., help UK automotive businesses cut transaction costs by 50% to 90%. Whether you're processing vehicle sales, service payments, or fleet charging fees, switching to open banking, QR code payments, and pay-by-link solutions puts money back in your pocket from day one.

The road ahead demands decisive action. Make your move today and turn payment processing from a cost centre into a competitive advantage.