Spring Statement 2025: what can drivers expect?

This Wednesday's Spring Statement is Chancellor Rachel Reeves’ first major fiscal statement since the October 2024 Autumn Budget.

The Chancellor will present an update on the UK economy following a new set of forecasts from the Office for Budget Responsibility (OBR).

As the health of the economy has worsened since October, it is possible the Chancellor may not be on track to meet her fiscal rules.

This, combined with the fact the Spring Statement is not a formal budget, means no big automotive announcements are expected.

However, it is likely the Chancellor could still give an update on major policy decisions impacting drivers that were made in the October Budget.

With ever-growing pressure from the UK’s obligatory transition to electric vehicles from the ZEV mandate – which itself is under review – some in the industry are anticipating what the Chancellor may have in store.

As things stand, trade body the SMMT says the growth in consumer demand for EVs has been lower than expected and the electric car market risks flatlining. 

AA head of roads policy Jack Cousens says the Chancellor "has the opportunity to help the transition to electric cars by making some positive fiscal choices on Wednesday."

Here, we look at the key areas under discussion.

EV road tax

In the Autumn Budget, the Chancellor announced big changes for electric car road tax. Starting from 1 April 2025, EVs will no longer be exempt from VED road tax. In the first year, new EVs will be subject to a £10 rate, with the standard rate of £195 a year applying from the second year onwards.

What’s more, EVs will also be subject to the Expensive Car Supplement. This sees cars costing over £40,000 paying an extra £410 a year between years two to six.

Because of their higher prices, electric car drivers are three times more likely to be hit by the ‘luxury’ tax than petrol or diesel drivers.

It’s not just new EVs that are affected, either. Electric cars already on the road and registered between April 2017 and 2025 will also now be subject to the £195 a year rate. It’s the first time in history that such a retrospective charge has been applied.

Prices go up for older EVs between 2001 and 2017 too, but only to £20 a year.

The AA is not happy. While it believes that all vehicles should pay VED, electric vehicle tax should be set at a discounted rate to incentivise their purchase.

"The introduction of VED at the full rate from 1 April could have a negative impact on the future of EV ownership," says its head of roads policy Jack Cousens.

"Drivers tell us that incentives are still required at this early stage of adoption."

It could still be worse, though – there were also changes to the CO2-based first-year VED road tax rates for regular petrol and diesel cars.

The biggest impact will be felt by those buying the highest-emitting cars, with the first year rate for a Range Rover V8 going up from £2745 to £5490…

EV public charging

If road tax for EVs is going up, another aspect should be cut, reckon lobbyists – the 20% VAT charged on public charging should reduce to 5% in order to match household electricity costs.

As things stand, those without off-street parking are being hit with a ‘pavement tax’ that is costing them nearly £5 a charge.

Lobby group FairCharge has long been calling for VAT on home and public charging to be equalised. Earlier in March, it delivered a letter calling on the Chancellor to take action.

The letter was signed by industry leaders such as JLR, Stellantis, Polestar, energy provider E.ON and even Greenpeace.

VAT on new EVs

Since January 2024, the SMMT has been calling for VAT to be halved on new electric cars. It has recently renewed this call after Future of Roads Minister Lillian Greenwood confirmed the pledge to ban the sale of conventional new petrol and diesel cars from 2030 was "iron clad."

Halving VAT on new EV purchases for the next three years would give consumers an extra £7.7bn in additional buying power, it said.

Of course, the fact it would therefore cost the Treasury £7.7bn means that many are not holding out hope that something like this will be announced on Wednesday.

Potholes

The government announced a £500m boost to road maintenance in England during the Autumn Budget, taking the total up to £1.6bn. The Department for Transport has now confirmed local authorities will start receiving this boost from mid-April.

However, councils must publish annual progress reports, or they’ll lose a quarter of the extra funding.

Prime Minister Sir Keir Starmer said broken roads were "not only risking lives but also cost working families, drivers and businesses hundreds – if not thousands of pounds – in avoidable vehicle repairs".

The PM put the cost of fixing the average pothole at £600.

As transport is a devolved matter in the UK, only councils in England will receive the additional funding.

The Local Government Association has estimated clearing the country’s backlog of road repairs would cost almost £17bn to fix, but no extra funds are expected in the Spring Statement.

Pickups

After a strange 'will they won't they' last year, the Chancellor finally confirmed in the Autumn Budget that the beneficial tax treatment of double-cab pickups with a payload of more than 1000kg will end. 

Instead of a flat rate of Benefit-in-Kind tax, they will switch to the CO2-based system used by other company cars from 1 April 2025. 

This is now considered baked-in and it is unlikely the Chancellor will change things on Wednesday.