What the Autumn 2026 Budget means for your car running costs: A used car buyer's guide

The Chancellor delivered the 2026 Budget today, and for anyone running a car — or thinking about buying one — the headline is unusually reassuring. Fuel duty stays frozen. VAT on household electricity stays at zero. The pay-per-mile charge arriving in 2028 is unchanged from what was announced a year ago. Very little about the cost of keeping a car on the road is about to move.

That matters more than it sounds, because pump prices have spent the autumn doing something dramatic entirely on their own. Here is what the Budget actually said, what it means in pounds and pence, and how it should shape your thinking if you are buying a used car in the next few months.

Fuel duty is frozen until July 2027

This is the big one. Fuel duty stays at 52.95p per litre, and the temporary 5p cut in place since 2022 has been extended again — this time to 1 July 2027.

Two things were due to happen that now will not. The 5p cut was scheduled to be restored in January 2027, which would have added 5p to every litre in the middle of winter. That has been cancelled. The RPI-linked increase that normally follows has been deferred to July 2027 as well. The government puts the saving for the average car driver at around £230 compared with previously published plans, and says duty is now at its lowest level in over 16 years.

For a typical driver filling a 55-litre tank once a fortnight, cancelling the January rise alone is worth roughly £70 a year. It is not transformational, but it is money that was due to leave your account in ten weeks and now will not.

One caveat worth holding onto: freezing duty stops prices going up, it does not bring them down. Duty is only one component of what you pay at the pump, alongside the wholesale oil price, retailer margin and VAT. The Chancellor framed the Budget as “breathing space” rather than relief, and on fuel that is the right way to read it.

The real story at the pumps is not the Budget

Here is the context that makes the freeze matter. At the start of October, RAC Fuel Watch recorded the average UK diesel price at 200.01p per litre — a record, and the first time diesel has averaged £2 a litre. Petrol sat at 174.71p. The rise has been driven by disruption to global fuel supplies rather than anything the Treasury has done.

Those numbers change the arithmetic of car ownership considerably, and they are worth understanding per mile rather than per litre:

• Petrol at 45mpg: around 18p per mile, or roughly £1,765 a year at 10,000 miles.
• Diesel at 55mpg: around 17p per mile, or roughly £1,650 a year at 10,000 miles.
• Electric on a standard tariff (26.32p per kWh under the current price cap): around 7p per mile, or roughly £700 a year.
• Electric on an off-peak EV tariff (typically around 7p per kWh overnight): around 2p per mile, or roughly £180 a year.

The gap between diesel and a home-charged EV is now close to £1,500 a year for an average driver. Diesel's traditional advantage — better economy on long runs — has been substantially eroded by the fact that it costs 25p a litre more than petrol. If you are weighing up a diesel purely on running costs, that premium is doing a lot of work against it.

Electricity stays VAT-free until July 2027

VAT on household electricity was cut from 5% to zero on 1 October 2026, and the Budget has extended that to July 2027. The government expects it to take around £50 off the Ofgem price cap in April 2027. For context, the cap currently sits at £1,723 a year for a typical household paying by Direct Debit.

If you charge an electric car at home, this is a direct saving on every mile you drive. It also means the price cap electricity rate quoted above already has the VAT removed — the 26.32p per kWh figure is what you actually pay.

£100 million to cut public charging costs

The Budget allocated £100 million across 2027-28 and 2028-29 to reduce prices at local, lower-powered public chargers in Great Britain, starting in spring 2027. The government estimates this is worth around £150 a year to an EV driver who relies on on-street charging and has no driveway.

Alongside it, a taskforce will look at whether drivers can use their own domestic electricity tariff at eligible local chargepoints — which would be a meaningful change for the roughly one in three UK households without off-street parking.

One thing that did not happen: VAT on public charging stays at 20%, against 0% for home electricity. That disparity has been a long-standing complaint from EV drivers, and the Chancellor left it alone. Rapid charging on a motorway remains substantially more expensive than charging at home, so an EV still makes most financial sense if you can plug in where you park.

Pay-per-mile: no change to the rates

Electric Vehicle Excise Duty — eVED, the pay-per-mile charge announced in the 2025 Budget — was confirmed again with no change to its rates or its start date, despite considerable lobbying from the motor industry.

From April 2028, drivers of fully electric cars will pay 3p per mile, and plug-in hybrid drivers 1.5p per mile, on top of standard road tax. Self-charging hybrids that cannot be plugged in are not affected. At 10,000 miles a year that is £300 for an EV and £150 for a plug-in hybrid.

What the Budget did add was detail on how it will actually work, and some of it is genuinely useful:

• A mileage estimation tool will be available when the scheme launches in April 2028.
• An opt-in service called eVED Connect will let cars with built-in connectivity report mileage automatically.
• An automated refunds model is promised by 2030, covering situations where you overestimate your mileage — or where you sell the car partway through the year.
• Further guidance for fleet operators is due before the end of this year.

That last point is worth noting if you are buying or part-exchanging a used EV after 2028: prepaid mileage will be refundable when the car changes hands, so it should not become a hidden cost in a private sale or a part exchange.

What stayed exactly the same

Sometimes the absence of news is the news. The Budget made no changes to:

• Standard road tax (VED), which remains £200 a year for almost all cars registered after April 2017, regardless of fuel type.
• The Expensive Car Supplement, the extra charge on cars with an original list price above £40,000 (£50,000 for electric cars registered from April 2026), payable for five years.
• The Electric Car Grant, which continues as previously funded.

For used car buyers, the Expensive Car Supplement is the one worth checking before you commit. It is based on the car's original list price when new, not what you pay for it — so a three-year-old car bought for £22,000 can still carry the surcharge if it listed above the threshold when it was first registered.

If you drive for work, your mileage allowance went up

The temporary 55p per mile tax-free allowance for the first 10,000 business miles has been made permanent. Above 10,000 miles, the rate rises from 25p to 35p per mile. Around three million people are expected to benefit. The government estimates it is worth around £120 a year to someone covering 6,000 business miles, and up to £300 for 15,000 miles.

So what should you actually do?

If you were waiting for the Budget before buying, there is nothing here to wait any longer for. Running costs are stable, the tax treatment of every fuel type is settled through to 2028, and the one change still coming is both modest and well signposted.

The decision that matters most is still fuel type, and today's pump prices push harder than the Budget does:

Choose petrol if you do modest mileage, have no off-street parking, and want the lowest purchase price. At under 8,000 miles a year the fuel saving from anything else rarely justifies the price difference.

Think carefully about diesel. At 200p a litre, the economy advantage is largely cancelled out. It still works for genuinely high-mileage motorway drivers, but the case is weaker than it has been in years.

Choose electric if you can charge at home. Around 2p a mile overnight against 18p for petrol is a gap that pays back a higher purchase price quickly. Even with pay-per-mile added in 2028, a home-charged EV at 10,000 miles a year costs roughly £480 in running costs against £1,765 for petrol.

Choose a self-charging hybrid if you want better economy than petrol but have nowhere to plug in — and note it sits outside the pay-per-mile charge entirely.

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Carsa is a credit broker, not a lender. Finance is subject to status and affordability checks. Figures in this article are based on published rates and average prices at the time of writing and are illustrative only — your own costs will depend on your car, your mileage, your tariff and your driving.