Chancellor Rachel Reeves delivered her Budget after details of her tax and spending plans were released early by mistake by the OBR (Office for Budget Responsibility).
Amongst all the announcements were some fundamental changes to road fund taxes. The announcement has confirmed that the UK Government intends to introduce a new road-use charge for electric and hybrid vehicles starting in April 2028. As Jaguar progresses toward becoming a fully electric luxury brand by 2026, this development arrives at a pivotal moment for the Coventry car builder.
Under the proposed system, EV drivers will pay 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile, with both rates increasing annually in line with inflation. Although the government positions the charge as “about half the fuel duty rate paid by drivers of petrol cars,” the shift marks a significant recalibration of incentives surrounding zero-emission mobility.
For the average EV driver covering 8,500 miles annually, the expected yearly cost would be around £255—still lower than the comparable cost faced by internal combustion engine (ICE) drivers today. However, the OBR predicts that this policy might decrease electric vehicle demand, raising lifetime ownership costs and possibly delaying some customers’ switch to electric.
What this means for Jaguar / JLR
As JLR prepares to launch a completely reinvented lineup of all-electric Jaguars, customer perception of EV value will be crucial. A new per-mile tax adds another factor in the decision-making process, and we recognise the need to ensure our future products remain compelling, desirable, and competitive. The OBR’s expectation of roughly 440,000 fewer EV sales across the market underscores the importance of distinctive design, strong performance, and a luxury experience that justifies the shift to electric.
Across the JLR portfolio—Jaguar and Land Rover—this policy may accelerate the pressure on manufacturers to adjust pricing strategies or rebalance sales between EV and non-EV models to meet the 2030 zero-emission mandate. While the government estimates the tax could generate £1.1bn in 2028–29, rising to £1.9bn by 2030–31, the actual impact will depend on how the market responds and how quickly consumers adopt electric vehicles.
JLR’s Reimagine strategy already places electrification at the heart of its long-term vision. Although the road tax may temper short-term demand, it strengthens the case for ensuring Jaguar EVs deliver an unmistakable blend of British modern luxury, capability, and innovation that stands apart in a more cost-conscious market.
This evolving policy landscape is another reminder that the transition to electric mobility is dynamic and complex, and that Jaguar has their work cut out against these ever-increasing headwinds to ensure they is delivering aspirational products that excite the market to own them regardless of their motive power.
Owners of historic Jaguars
Owners of historic vehicles — those currently eligible for Historic Vehicle (H-class) tax exemption — are not affected by the budget announcement.
Vehicles over 40 years old (rolling date) are exempt from Vehicle Excise Duty (VED).
The budget did not reference historic vehicles at all, meaning they continue to pay £0 in road tax.
Furthermore, it shows that, since the proposed per-mile charge is aimed at replacing lost fuel duty from electrification, the Government remains focused on EVs and plug-in hybrids — not classics.
It’s fair to say that many in the historic vehicle industry, which contributes over £7.3 billion to the UK economy, breathed a sigh of relief that owners of historic vehicles remain unaffected for now. Tax exemptions will stay in place unless the government explicitly amends the legislation outside of a budget — and there’s no indication of that in either the budget announcements or the leaked OBR report.
Implications of the changes to luxury car tax
Today’s budget confirms a rise in what is often referred to as the “luxury-car tax” — formally the Expensive Car Supplement (ECS) — for vehicles with a list price above the threshold. The threshold has been raised to £50,000 (from £40,000 previously), which somewhat softens the blow for higher-cost cars.
The rise in the ECS threshold will make the mid-range EV market a challenging arena, as manufacturers compete to find a ‘sweet spot’ to attract price-sensitive buyers seeking electric vehicles without heavy tax burdens. In a way, Jaguar’s decision to position itself well beyond this competition may turn out to be a very wise move.
4 Responses
Great analysis Wayne!
Given the price point that JLR have set for the forthcoming new model I don’t think the new tax will influence their buying decision at all, especially as they are unlikely to be covering a high mileage during their ownership. It will be the automotive equivalent of the so-called Mansin Tax where properties valued at over £2 million will pay an extra levy; it’s a drop in the ocean for them.
Nick is probably right in saying that people paying over £100,000 for a car will hardly be likely to be bothered about an extra 3p per mile but it is most certainly not the equivalent of the Mansion Tax. There are many people in London who are Asset-rich by virtue of the increase in property prices over the last few decades but are Income-poor and will be forced to sell much-loved homes of a size which, in many other areas of England, would not require them to pay over £200 per month to the Exchequer.
Whilst every one is talking about issues around the budget, is anyone watching Britain’s back door. I refer to the the influx of ev`s from manufacturers of heavy government subsidised cheap import of cars that cannot be sold in the country of manufacture because of a drop in demand and over capacity. In particular a country that has a poor track record of human rights. The practise of flooding the UK market with these cheap imports, could I believe have a devastating impact on UK car producers.
My other concern is the devaluation costs on these vehicles.
I am in total agreement with Stuart – Ford and Honda dealers near me are now peddling such Oriental EVs. Slippery slope indeed. There are so far only two makes available from these dealers, but their country of origin has over fifty manufacturers ready to filter their products in here.