Autumn Budget 2025: What it means for your business' benefits package
Chancellor Rachel Reeves has delivered the Autumn Budget, confirming significant changes to UK tax and employee benefits — with many measures widening the overall tax burden, which is now projected to reach a historic high of over 38% of GDP by 2030/31. Yet amidst cuts, caps, and new limits affecting a wide range of reliefs, one standout exception emerged: electric vehicle (EV) salary sacrifice not only remains fully protected, but is strengthened.
For businesses offering employee benefits — and for individuals considering an electric vehicle through salary sacrifice — understanding these confirmed changes is essential for planning ahead. While many tax-efficient perks are becoming less generous, EV drivers instead received direct government support, including:
- A £1.3bn EV grant scheme, giving employees up to £3,750 off new electric vehicles
- Unchanged EV salary sacrifice rules, even as other benefits face tighter restrictions
- Increased funding for public charging infrastructure and a review aimed at reducing public charging costs
- Preserved running-cost advantages — with home charging still far cheaper than petrol, and salary sacrifice helping offset the future 3p-per-mile road pricing model
In a Budget defined by rising taxes and reduced reliefs, EV salary sacrifice stands out as one of the few benefits retaining its full value — and gaining additional support. Here’s what these changes mean, and how loveelectric can help your business navigate and capitalise on them.
£1.3bn Boost to Electric Car Grant Scheme
Alongside the pay-per-mile announcement, the Chancellor confirmed a major investment in EV adoption that significantly offsets the future taxation. Here's what the grant offers:
The Grant Structure
- Up to £3,750 discount on the most sustainable electric vehicles
- £1,500 discount on vehicles meeting baseline environmental criteria
- Available on EVs with a recommended retail price of £37,000 or less
This represents a substantial incentive that makes EVs more accessible to working families and demonstrates the government's continued commitment to electrification despite the 2028 mileage charge.
Additional Charging Infrastructure Investment
The Budget also allocated £200 million to accelerate the rollout of public charge points across the UK, with specific support for:
- Local authorities to install on-street charging points
- Expansion of rapid charging hubs in underserved areas
- Technology upgrades to existing infrastructure
Government Review into Public Charging Costs
Recognising concerns about the cost of public charging, the Chancellor announced a comprehensive review into public charging costs, with findings to be reported by autumn 2026.
This review will examine:
- The disparity between home and public charging costs
- VAT treatment of public versus domestic charging
- Network operator pricing structures
- Ways to make public charging more affordable for those without home charging access
What This Means for EV Drivers
The £1.3bn grant scheme fundamentally changes the economics of EV adoption:
- For salary sacrifice customers: The grants apply on top of salary sacrifice savings, potentially reducing the net cost of a new EV by up to 60-70% compared to buying outright with cash.
- Timeline advantage: With grants available now but the mileage charge not arriving until 2028, there's a clear window of maximum benefit for those who act quickly.
- Offsetting future costs: For a driver who secures a £3,750 grant and then faces the £240 annual mileage charge from 2028, it would take over 15 years for the charge to outweigh the initial grant benefit.
3p-per-mile EV Tax | Confirmed from 2028
The Chancellor has confirmed a 3p-per-mile tax on electric vehicles and a £.0015p-per-mile tax on hybrid vehicles, to be implemented from 2028 following public consultation.
What's Been Confirmed
The "VED+" system has been approved, where EV drivers will:
- 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 will amount to an additional £240 per year, bringing total VED costs to £435.
Putting It in Perspective
While this additional cost is now certain, 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 will 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 won't take effect until 2028, 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 won't apply to EVs already on the road, meaning cars delivered before 2028 will likely be exempt.
Salary Sacrifice Pensions | £2,000 annual cap Confirmed
What's Been Confirmed
The Chancellor has introduced a £2,000 annual cap on the amount that can be sacrificed into pensions without incurring National Insurance contributions from 2029 onwards.
Previously, employees could contribute unlimited amounts to their pension through salary sacrifice, with both employees and employers saving on National Insurance payments on these contributions. The confirmed cap means that any pension contributions above £2,000 per year will now be subject to standard NIC rates.
Why It Matters
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 restriction will raise substantial revenue for the Treasury.
The Impact on Employers and Employees
The confirmed pension salary sacrifice restrictions have significant implications:
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) will face an additional £460 in employee NI each year, while their employer's NI bill will rise by approximately £3,450.
For employers: Many businesses have introduced generous pension schemes as a cornerstone of their benefits packages. These 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 have warned 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.
Income Tax and Threshold Changes | Confirmed extension
Chancellor Reeves has confirmed the extension of the freeze on income tax thresholds beyond 2028 to 2030, a measure expected to 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 raise £39 billion annually by 2029-30.
How Salary Sacrifice Protects You: Worked Examples
With the threshold freeze confirmed, let's examine how salary sacrifice provides protection by reducing your taxable income.
Scenario 1: 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 threshold freeze impact by 2030:
As inflation pushes your salary up but thresholds don't move, a greater proportion becomes taxable. A 3% annual increase would take you to £32,782 by 2030, with £20,212 taxable.
With £300/month EV salary sacrifice (£3,600/year):
- Taxable income reduced to: £13,830
- Income tax at 20%: £277
- Net EV cost after tax and NI savings: Approximately £195/month
- Protection from fiscal drag: Significantly less income exposed to taxation as thresholds remain frozen
Scenario 2: 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 threshold freeze impact by 2030:
Salary inflation without threshold increases means more income taxed at 40%. At £65,607 by 2030 (3% annual increases), you'd have £15,337 taxed at the higher rate.
With £400/month EV salary sacrifice (£4,800/year):
- Taxable income reduced to: £55,200
- Basic rate: £37,700 at 20% = £7,540
- Higher rate: £4,930 at 40% = £1,972
- Total income tax: £9,512
- Net EV cost after tax and NI savings: Approximately £260/month
- Protection from fiscal drag: £4,800 less exposed to the frozen higher rate threshold
Scenario 3: Additional Rate Taxpayer (£150,000 salary)
Current situation (without EV salary sacrifice):
- Income tax: Approximately £53,432
With threshold freeze impact by 2030:
More of your income is taxed at 45% as the additional rate threshold remains frozen at £125,140.
With £600/month EV salary sacrifice (£7,200/year):
- Taxable income reduced to: £142,800
- Income tax reduced substantially
- Net EV cost after tax and NI savings: Approximately £360/month
- Protection from fiscal drag: £7,200 less exposed to the frozen additional rate threshold
The Protection Mechanism
The fundamental protection that EV salary sacrifice provides works particularly well with frozen thresholds:
- Reduced taxable income: Your gross salary is reduced before tax calculations begin, keeping you further from higher rate thresholds.
- Less exposure to fiscal drag: As inflation pushes salaries up but thresholds stay frozen, salary sacrifice helps counteract this by reducing your taxable base.
- Double benefit: You save on the tax you're already paying AND avoid being pushed into higher brackets as quickly.
- Comprehensive package: The car, insurance, maintenance, and breakdown cover all come from pre-tax salary.
Other Budget Measures | Further tax changes
Several other measures were confirmed that could affect employees and businesses:
Inheritance Tax Threshold Extension
The freeze on inheritance tax thresholds has been 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 the Autumn Budget 2024, no further increases were announced in this Budget.
Council Tax and Property Taxes
Minor reforms to council tax were announced, however a Mansion tax has been introduced meaning those with properties worth over £2,000,000 will have to pay and additional £2500/year up to £7,500/year for houses over £5,000,000
VAT on Domestic Energy
The Chancellor did not reduce VAT on domestic electricity, which remains at 5%. However, the public charging cost review may address the disparity between domestic and public charging VAT treatment.
loveelectric Charge Card: Savings Regardless of Where You Charge
While VAT changes (has/hasn’t materialised) 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 20-60%
- Protection against future cost increases through locked-in rates and discounts
This means that even without VAT relief on domestic electricity, 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.
What The Budget Means for Your Business
With significant confirmed changes to employee benefits, 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, plus access to new government grants of up to £3,750.
- 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 whose pension schemes have just become less attractive.
- 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 enhanced value: Communicate that employees can now access up to £3,750 in government grants on top of salary sacrifice savings, while pension schemes face new restrictions.
- 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).
For Employees
If you're considering an electric vehicle, several factors suggest acting now:
- Maximise the grant: Secure up to £3,750 off a new EV before potential changes to the scheme.
- Lock in current terms: Salary sacrifice arrangements established before the 2028 mileage charge 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 will likely be grandfathered and exempt from future mileage-based charges.
- Take advantage of charging infrastructure investment: Benefit from the £200 million public charging expansion now underway.
Looking Ahead
The Autumn Budget 2025 has brought clarity to the UK tax landscape.
Several key themes are now confirmed:
- Tax rises have arrived: The Chancellor has delivered on her commitment to raise revenue through threshold freezes and benefit restrictions.
- Pension salary sacrifice faces restrictions: The £2,000 cap will be in place from 2029 onwards, making pension schemes less attractive as a core benefit.
- EV salary sacrifice remains protected and enhanced: Government backing through to 2030, plus new £1.3bn grant scheme demonstrates continued commitment.
- Benefits packages need diversification: Relying solely on pensions is now riskier than ever.
This article reflects the confirmed measures from the Autumn Budget 2025, delivered on 26 November 2025. Tax treatment depends on individual circumstances and may be subject to change. loveelectric recommends seeking independent financial and tax advice appropriate to your situation.
