The recent Budget announcement has sparked quite a bit of chatter amongst EV drivers and those considering making the switch.
If you’re wondering if your salary sacrifice scheme is affected, what the new pay-per-mile charge means in practice, and whether now is still the right time to go electric, you’re in the right place.
Good News – EV Salary Sacrifice Remains Untouched
First things first – and this is the big one that’s causing unnecessary worry – your EV salary sacrifice scheme is completely unaffected by the Budget changes.
The pension-related salary sacrifice reforms announced in the Budget apply solely to pension contributions, not electric vehicle schemes. From 2029, there will be a £2,000 cap on pension contributions made through salary sacrifice for National Insurance purposes, but this has absolutely nothing to do with car schemes.
If you’re currently leasing an electric vehicle through salary sacrifice, or you’re considering it, you can breathe easy. This remains one of the most tax-efficient ways to drive an electric car, with potential savings of hundreds of pounds each month compared to traditional leasing or purchasing.
The 3p Per Mile Charge: Context is Everything
Yes, the government has introduced a new Electric Vehicle Excise Duty (eVED) starting in April 2028. Electric vehicle drivers will pay 3p per mile, whilst plug-in hybrid drivers will pay 1.5p per mile. But before you panic, let’s put this into proper perspective.
What Does This Actually Cost?
Based on typical annual mileage, here’s what you’d be looking at:
- 8,000 miles per year: £240 annually (£20 per month)
- 10,000 miles per year: £300 annually (£25 per month)
- 12,000 miles per year: £360 annually (£30 per month)
For plug-in hybrid drivers covering the same distances, you’d pay half those amounts.
EVs Still Win on Running Costs
Even with this new charge, electric vehicles remain significantly cheaper to run than petrol or diesel cars.
The 3p per mile rate is approximately half what the average petrol or diesel driver pays in fuel duty. When you factor in the lower cost of electricity compared to petrol, reduced maintenance expenses, and the other tax benefits, the financial case for EVs remains compelling.
Consider this example: A typical petrol car driver covering 10,000 miles annually might spend around £1,200-1,500 on fuel alone (at current prices). An EV driver would pay roughly £300-400 for electricity plus the £300 eVED charge – still saving hundreds of pounds per year, before you even account for lower servicing costs.
How Will It Work?
The government has been clear about protecting driver privacy. There won’t be any tracking devices or GPS monitoring. Instead, drivers will self-report their mileage alongside their existing Vehicle Excise Duty payments. It’s a straightforward administrative process, not an intrusive surveillance system.
Electric Car Grant Extended to 2030
In genuinely positive news, the government has committed an additional £1.3 billion to the Electric Car Grant, extending it through to 2030. This brings total funding to around £2 billion and provides much-needed certainty for those planning to make the switch.
How the Grant Works
The scheme offers discounts at the point of sale for new electric vehicles priced at £37,000 or below:
- Band 1 (highest sustainability): £3,750 discount
- Band 2 (meets environmental criteria): £1,500 discount
Since launching in July, the grant has already supported over 35,000 drivers in purchasing electric vehicles. Eligible models include popular choices from manufacturers such as Nissan, Ford, Citroën, and Renault, with more being added regularly.
The grant is automatically applied by dealers – you don’t need to do anything except choose an eligible vehicle. Combined with salary sacrifice savings, this can make electric vehicles remarkably affordable.
Additional Support Measures
The Budget included several other measures to support the EV transition:
- The threshold for the expensive car supplement on Vehicle Excise Duty has increased from £40,000 to £50,000, saving eligible EV drivers £440 annually.
- Changes to benefit-in-kind rules for Employee Car Ownership Schemes have been delayed until April 2030.
- An additional £100 million is being invested in EV charging infrastructure.
- The Drive35 programme has received a further £1.5 billion in funding through to 2035.
The Bigger Picture
Whilst some industry voices have expressed concern that the new charges might dampen demand, it’s worth remembering that the transition to electric vehicles is about more than just immediate running costs. Air quality improvements, reduced carbon emissions, and supporting UK manufacturing jobs in next-generation technology all factor into the equation.
The government faces a genuine challenge: as more drivers switch to electric vehicles, fuel duty receipts are projected to decline from around £25 billion today to approximately £12 billion by the 2030s, eventually approaching zero by 2050. All vehicles use the roads, and all drivers benefit from road maintenance – so it’s fair that all contribute, regardless of fuel type.
Should You Still Go Electric?
Absolutely. Even with the 2028 mileage charge factored in, electric vehicles offer:
- Significantly lower running costs than petrol or diesel
- Reduced maintenance requirements (no oil changes, fewer brake replacements)
- Excellent tax benefits, especially through salary sacrifice
- Grants of up to £3,750 towards purchase
- An ever-expanding charging network
- The satisfaction of driving more sustainably
The key is to look at the total cost of ownership, not just one element in isolation. When you do the maths properly, electric vehicles continue to make compelling financial sense alongside their environmental benefits.
Our Final Notes
The Budget has introduced some changes to the EV landscape, but none that fundamentally alter the attractiveness of electric vehicles. The salary sacrifice schemes remain as beneficial as ever. The running costs are still lower than those of conventional cars, and the government is backing the transition with substantial grant funding through to 2030.
If you’ve been considering making the switch, there’s never been a better time. The combination of technology improvements, expanding charging infrastructure, competitive pricing, and government support creates a perfect environment for going electric.