London, December 01, 2025
The UK government unveiled its 2025 Budget, introducing measures to reduce household energy bills, extend support for electric vehicle purchases, and adjust taxation policies to balance environmental priorities with fiscal sustainability.
Energy Bills and Subsidies
Chancellor Rachel Reeves announced a reduction in average household energy bills by around £134 annually. This will be accomplished by shifting renewable-energy subsidies from energy bills onto general taxation, coupled with the termination of a scheme supporting energy-efficiency measures. The government aims to ease the financial burden on consumers amid ongoing energy market pressures.
Electric Vehicle Incentives
A significant £1.3 billion boost extends the electric car grant until 2029-30, providing up to £3,750 off eligible electric vehicle purchases. Additionally, from April 2026, the threshold for the “expensive car supplement” applied to electric vehicles will increase from £40,000 to £50,000, deferring additional vehicle tax liabilities for a broader range of EV models. Starting in 2028, a pay-per-mile excise duty on electric vehicles will begin, designed to replace revenues lost from the declining use of traditional fuel duties as petrol and diesel usage diminishes.
Fuel Duty and Oil & Gas Transition
Fuel duty rates on petrol and diesel remain frozen for the time being; however, the government signals a gradual rollback of earlier duty cuts to align tax income with environmental objectives. To ensure energy continuity during the transition to renewable sources, new “transitional energy certificates” will facilitate continued oil and gas production near existing North Sea sites.
Taxation Adjustments
The Budget includes increases in income tax rates affecting property, savings, and dividend income. It also imposes a new surcharge on property transactions. These tax changes target investors and property owners, reflecting the government’s intent to readjust fiscal policy while supporting sustainable revenue flows.
Policy Balance and Long-Term Strategy
These measures collectively illustrate the government’s dual approach: promoting green technology adoption and energy affordability for households, while managing fiscal constraints through taxation reforms. The extended electric vehicle incentives aim to foster sustainable transport, and the transitional arrangements for oil and gas production underscore the pragmatic recognition of current energy needs during the move to greener alternatives.
The 2025 Budget encapsulates a strategic commitment to environmental goals without compromising short-term economic stability, laying groundwork for a phased progression toward a lower-carbon economy while recalibrating government revenue sources.