CTA responds to Budget 2025

The Chancellor of the Exchequer, Rachel Reeves MP, presented her Budget 2025 to the House of Commons on Wednesday 26 November.

While there were several announcements which hit the headlines, two were of particular relevance and importance to the UK’s Community Transport movement.

Electric Vehicle Excise Duty

From April 2028, there will be a new mileage-based charge on electric and plug-in hybrid cars, called Electric Vehicle Excise Duty (eVED). This will be payable each year alongside at 3p per mile for electric cars and 1.5p per mile for plug-in hybrids. It is expected to raise £1.4bn.

There will be concerns that the Chancellor’s decision could disrupt the UK’s transition to zero-emission vehicles. It is also likely to raise costs for Community Transport operators, specifically volunteer car schemes and community-owned car clubs, and their volunteers.

Whilst we support the transition to more environmentally sustainable vehicles, it is important to ensure it is affordable for individuals, households and transport operators alike. It is also essential that the proceeds of any revenue-raising measures are invested into sustainable transport options.

Our members and their volunteers increasingly use electric cars to deliver essential services, such as non-emergency patient transport, helping to reduce costs and carbon emissions.

We will closely monitor the design and implementation of the eVED to understand its likely impact on the Community Transport sector, particularly on volunteering and decarbonisation.

However, for the rest of our sector, we will seek to ensure that buses and minibuses remain out of scope of the eVED, in line with the Government’s commitments today.

CTA will respond to the consultation which has been opened, and encourages our members to do the same, before it closes on 18 March.

Changes to the VAT treatment of PHVs

Value Added Tax (VAT) will be applied to Private Hire Vehicles (PHVs) following a consultation on the matter last year.

The Chancellor’s decision will likely result in higher fares for passengers. This will have a disproportionate impact on those who rely on accessible taxis and PHVs to travel due to their age, disability or long-term health condition, exacerbating existing transport inequalities faced by older people and disabled people in the middle of a cost-of-living crisis.

Many older people and disabled people who use Community Transport also rely on taxis and PHVs to make essential journeys to education, employment and health care. A third of community transport passengers tell us that if Community Transport was not available, they would have to travel by taxi or PHV. Nearly half wouldn’t travel at all, often because taxis and PHVs are already unaffordable.

If the Government presses ahead with these changes, more people will have to rely on the accessible transport provided by Community Transport operators. The revenue raised must be ringfenced for targeted measures which mitigate the undue adverse effects on the most affected passengers. This should include investment in the protection and expansion of Community Transport services to meet growing demand.

Next steps

We have already had initial discussions with the Department for Transport (DfT) on both of these issues in the aftermath of Budget day.

We will continue to make representations on behalf of our sector, keeping our members updated as we learn more.