Autumn Budget 2025: What it could mean for your business’ benefits package

With Chancellor Rachel Reeves set to deliver the Autumn Budget on Wednesday 26 November 2025, speculation is mounting about potential changes to UK tax and employee benefits - most notably pensions, cycle-to-work and electric vehicles. 

For businesses offering employee benefits and individuals considering an electric vehicle through salary sacrifice, understanding these rumoured proposals is crucial for planning ahead.

While much remains uncertain until the Chancellor takes to the despatch box, several key areas are under discussion that could affect both employers and employees. Here's what you need to know about the potential impacts on EV salary sacrifice schemes and how loveelectric can help your business navigate these changes.

The Fiscal Challenge Facing the Chancellor

Firstly, it’s key to understand the context behind these proposed changes. Chancellor Reeves faces a significant challenge. The Office for Budget Responsibility is expected to downgrade its economic forecast, potentially leaving a fiscal shortfall of between £20-40 billion. With manifesto commitments not to raise the main rates of income tax, National Insurance or VAT for employees, the Chancellor must find creative solutions to plug this gap.

In a pre-Budget speech on 4 November, Reeves confirmed that "all will have to contribute" to repairing public finances, with tax rises now considered inevitable rather than optional. However, the specific measures remain under wraps until Budget day.

3p-per-mile EV Tax | potentially coming 2028

Another widely reported Budget rumour concerns a potential 3p-per-mile tax on electric vehicles, expected to be announced for implementation from 2028 following public consultation.

What We Know

Multiple sources, including the BBC, The Telegraph, and the Financial Times, report that the Chancellor is considering a "VED+" system where EV drivers would:

• Estimate their annual mileage at the start of each year
• Pay a charge of 3p per mile on top of the existing £195 annual Vehicle Excise Duty
• Carry over unused payments if they drive less than estimated, or top up if they exceed it

For the average UK driver covering 8,000 miles annually, this would amount to an additional £240 per year, bringing total VED costs to £435.

Putting It in Perspective

While any additional cost deserves consideration, it's important to maintain perspective:

EVs remain significantly cheaper to run: Petrol costs around 15p per mile on average, while an EV driver charging at home pays roughly 2p per mile. Even with a 3p-per-mile tax added, EV running costs would still be approximately 67% cheaper than petrol.

The salary sacrifice advantage: Any additional cost is reduced through salary sacrifice. For a 40% taxpayer covering 8,000 miles per year, the £240 annual charge costs only around £144 net after salary sacrifice savings.

Three years to prepare: The tax wouldn't take effect until 2028 at the earliest, providing a clear window to benefit from current terms.

Trade bodies will advocate: Industry bodies including the BVRLA and SMMT will push for any such measure to be delayed until at least 2030 and to apply consistently across all vehicles, not just EVs.

Grandfathering likely: Such measures typically wouldn't apply to EVs already on the road, meaning cars delivered before 2028 would likely be exempt.

Salary Sacrifice Pensions | £2,000 annual cap

What's Being Proposed?

One of the most widely discussed rumours concerns potential restrictions on pension salary sacrifice schemes. Multiple reports suggest the Treasury is considering introducing a £2,000 annual cap on the amount that can be sacrificed without incurring National Insurance contributions.

Currently, employees can contribute unlimited amounts to their pension through salary sacrifice, with both employees and employers saving on National Insurance payments on these contributions. The proposed cap would mean that any pension contributions above £2,000 per year would be subject to standard NIC rates.

Why It Matters

The speculation has gained traction following HMRC's May 2025 research report, which tested three hypothetical scenarios for reducing salary sacrifice tax benefits with employers. A recent BDO survey found that over 90% of C-suite executives in mid-market businesses expect restrictions on pension salary sacrifice schemes, with 49% considering restrictions "quite likely" and 45% saying "very likely".

Tax relief on pensions costs the UK government approximately £52 billion annually, with £23.5 billion in National Insurance reliefs and £28.5 billion in Income Tax relief. This makes it an obvious opportunity for a Treasury seeking to raise substantial revenue.

The Impact on Employers and Employees

If pension salary sacrifice restrictions are introduced, the implications would be significant:

For higher earners: An employee earning £125,000 who sacrifices £25,000 to bring their taxable income below £100,000 (a common tax planning strategy to retain the personal allowance) would face an additional £460 in employee NI each year, while their employer's NI bill would rise by approximately £3,450.

For employers: Many businesses have introduced generous pension schemes as a cornerstone of their benefits packages. Any restrictions could undermine employee morale and make it harder to attract and retain talent, particularly at a time when employer National Insurance contributions have already risen from 13.8% to 15% (effective April 2025).

For retirement savings: Industry experts warn that restricting salary sacrifice could discourage pension participation at a time when the government is trying to address under-saving for retirement. The Association of British Insurers found that 38% of Brits would save less into their pension if salary sacrifice were capped, rising to 44% among women.

Cycle-to-Work Scheme | Cap on bike value

Reports suggest the Chancellor will introduce a cap on the Cycle-to-Work scheme, which currently has no upper limit but has seen costs to the Treasury rise from £55 million in 2019-20 to £130 million in 2024-25.

A Treasury source stated: "Cycle to Work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 e-bikes for weekend rides in the Surrey Hills."

There was previously a limit of £1,000 for the scheme, but this was removed in 2019 to allow for more expensive e-bikes to be purchased through the scheme. It’s likely that a reintroduction of the cap will be introduced to target those very same bikes.

What This Tells Us

The Cycle-to-Work cap demonstrates the government's approach: protecting environmental benefits for ordinary working families while restricting what they see as excessive use by high earners. This principle actually reinforces the protection for EV salary sacrifice, which:

• Serves a broader climate policy objective (the 2030 zero-emission vehicle mandate)
• Helps working families access cleaner transport they couldn't otherwise afford
• Represents a more significant lever for achieving Net Zero than cycle schemes
• Generates substantial tax revenue through BiK whilst keeping EVs accessible

Income Tax and Threshold Changes | How it’ll affect EV salary sacrifice

Recent reports suggest Chancellor Reeves has walked back plans for a direct increase to income tax rates. However, extending the freeze on income tax thresholds beyond 2028 to 2030 remains highly likely – a measure that could raise between £7.5-10.4 billion by the end of this Parliament.

Understanding Fiscal Drag

The threshold freeze has been in place since 2021 and works as a "fiscal drag" mechanism. Because tax bands don't rise with inflation, more workers gradually move into higher tax brackets, and a greater proportion of their income becomes taxable – even though the rates themselves remain unchanged.

According to the Institute for Fiscal Studies, freezing the thresholds at which basic (20%) and higher (40%) rates apply could alone raise £39 billion annually by 2029-30.

If Income Tax Rates Were Increased: Worked Examples

While direct rate increases appear less likely following recent reports, let's examine the impact if the Chancellor did pursue this option – and how salary sacrifice provides protection.

Basic Rate Taxpayer (£30,000 salary)

Current situation (without EV salary sacrifice):

• Personal allowance: £12,570
• Taxable income: £17,430
• Income tax at 20%: £3,486
• Take-home after tax and NI: Approximately £24,720

With 2p income tax increase (22% rate):

• Income tax would be: £3,835
• Additional cost: £349 per year

With £300/month EV salary sacrifice (£3,600/year):

• Taxable income reduced to: £13,830
• Income tax at 22%: £277
• Net EV cost after tax and NI savings: Approximately £195/month
• Protection from tax increase: £87 saved annually by having less income exposed to the higher rate

Higher Rate Taxpayer (£60,000 salary)

Current situation (without EV salary sacrifice):

• Personal allowance: £12,570
• Basic rate band: £37,700 at 20% = £7,540
• Higher rate: £9,730 at 40% = £3,892
• Total income tax: £11,432

With 2p income tax increase (22% basic, 42% higher):

• Basic rate: £37,700 at 22% = £8,294
• Higher rate: £9,730 at 42% = £4,087
• Total income tax: £12,381
• Additional cost: £949 per year

With £400/month EV salary sacrifice (£4,800/year):

• Taxable income reduced to: £55,200
• Basic rate: £37,700 at 22% = £8,294
• Higher rate: £4,930 at 42% = £2,071
• Total income tax: £10,365
• Net EV cost after tax and NI savings: Approximately £260/month
• Protection from tax increase: £388 saved annually by having £4,800 less exposed to higher rates

Additional Rate Taxpayer (£150,000 salary)

Current situation (without EV salary sacrifice):

• Income tax: Approximately £53,432

With 2p increase to all rates:

• Income tax would be: £56,182
• Additional cost: £2,750 per year

With £600/month EV salary sacrifice (£7,200/year):

• Taxable income reduced to: £142,800
• Income tax reduced to: £54,022
• Net EV cost after tax and NI savings: Approximately £360/month
• Protection from tax increase: £864 saved annually by having £7,200 less exposed to the highest rates

The Protection Mechanism

The fundamental protection that EV salary sacrifice provides works regardless of whether thresholds are frozen or rates are increased:

1. Reduced taxable income: Your gross salary is reduced before tax calculations begin
2. Less exposure to tax changes: Whatever changes are made to rates or thresholds, you're paying them on a smaller income base
3. Double benefit: You save on the tax you're already paying AND on any increases that come
4. Comprehensive package: The car, insurance, maintenance, and breakdown cover all come from pre-tax salary

Other Budget Speculation | Further tax changes

Several other rumoured measures could affect employees and businesses:

Inheritance Tax Threshold Extension

The freeze on inheritance tax thresholds until 2028 may be extended to 2030, with the nil-rate band remaining at £325,000. While this doesn't directly impact salary sacrifice, it's another example of threshold freezes being used to raise revenue.

Capital Gains Tax

Already increased in Autumn Budget 2024, further increases are possible. This could affect employees who receive shares as part of their remuneration package.

Council Tax and Property Taxes

Various reforms to council tax and stamp duty are under discussion, though major changes would require consultation and are unlikely to be implemented quickly.

VAT on Domestic Energy

There's speculation the Chancellor may reduce VAT on domestic electricity from 5% to provide cost-of-living relief. This would benefit EV drivers who charge at home, though it would widen the gap for those relying on public charging.

loveelectric Charge Card: Savings Regardless of Where You Charge

While VAT changes may or may not materialise, loveelectric has already addressed the charging cost challenge with our Charge Card. Regardless of where you charge – at home, at work, or on the public network – you could save up to 60% on the cost of EV charging with loveelectric.

The Charge Card provides:

• Significant discounts across the UK's major charging networks
• Simplified payments with no need for multiple apps or accounts
• Salary sacrifice benefits on charging costs, saving an additional 20-50%
• Protection against future cost increases through locked-in rates and discounts

This means that whether the Chancellor reduces domestic electricity VAT or not, loveelectric customers are already accessing some of the most competitive charging rates available – addressing one of the key barriers to EV adoption and ensuring that public charging remains affordable. Find out more about the Charge Card.

What The Budget Means for Your Business

With the Budget just a week away and significant changes to employee benefits on the horizon, now is the time to act strategically.

For Businesses Without EV Salary Sacrifice

If your benefits package is heavily weighted towards pension salary sacrifice, you should be considering how to diversify your offering. EV salary sacrifice provides:

Immediate employee value: Tangible benefits that employees can see and use daily

NIC savings for employers: With employer NI now at 15%, salary sacrifice schemes help offset these increased costs

Competitive recruitment advantage: Stand out from competitors still relying solely on traditional benefits

Risk-free implementation with loveelectric: Our Zero Risk Guarantee means no financial exposure if employees leave early

Check your eligibility or get in touch with us.

For Businesses With EV Salary Sacrifice

If you already offer an EV scheme, consider:

Promoting the scheme’s stability: Communicate to employees that EV salary sacrifice remains protected while other benefits face uncertainty

Adding the Charge Card: Enhance the value proposition with our Charge Card offering significant savings on public charging

Expanding eligibility: Consider making the scheme available to more employees to maximise uptake and NIC savings

Reviewing your provider: Ensure you're getting transparent pricing and true zero-risk protection (many providers claim zero risk but have significant caveats)

Explore the loveelectric Charge Card.

For Employees

If you're considering an electric vehicle, several factors suggest acting sooner rather than later:

Lock in current terms: Salary sacrifice arrangements established before potential changes continue under existing favourable conditions

Three-year protection window: BiK rates are locked at 3% for 2025/26 and will only gradually rise to 9% by 2029/30

Beat the 2028 pay-per-mile tax: Any vehicles delivered before 2028 would likely be grandfathered and exempt from future mileage-based charges

Maximise current savings: Current tax rates and thresholds won't last forever – secure your 30-60% savings now

Explore our full range here.

Prepare for 26 November

The Autumn Budget 2025 will undoubtedly bring changes to the UK tax landscape. While much remains speculation until the Chancellor delivers her statement, several themes are clear:

1. Tax rises are coming: The Chancellor has confirmed this explicitly
2. Pension salary sacrifice faces restrictions: Over 90% of employers expect changes
3. EV salary sacrifice remains protected: Government backing through to 2030 and beyond
4. Benefits packages need diversification: Relying solely on pensions is increasingly risky

Your Action Plan

Before the Budget (Now):

• Review your current benefits package
• Assess employee appetite for EV salary sacrifice
• Get a quote from loveelectric to understand potential savings
• Consider introducing or expanding your EV scheme to lock in current favourable terms

After the Budget (26 November onwards):

• Analyse the actual changes announced
• Communicate clearly with employees about what's changing and what's protected
• Promote EV salary sacrifice as a stable, government-backed benefit
• Work with loveelectric to implement or expand your scheme

‍

This article is based on speculation and reports current as of 18 November 2025, prior to the Autumn Budget on 26 November 2025. All potential policy changes are subject to confirmation in the Chancellor's Budget statement. Tax treatment depends on individual circumstances and may be subject to change. loveelectric recommends seeking independent financial and tax advice appropriate to your situation.

‍

‍