IFS Zooms In: The Economy Tax changes in the Budget
Dec 5, 2025
Stuart Adam, a Senior researcher at the Institute for Fiscal Studies with expertise in tax design, joins to dissect nuanced changes in the government’s Budget. They discuss the rationale behind upfront EV grants despite plans for a per-mile tax, and how this aims to manage congestion. Salary sacrifice limits and their potential impact on saving behaviors are also examined. The conversation further explores the implications of increased capital income tax, cuts to cash ISAs, and reforms affecting entrepreneurship, revealing a complex landscape of minor yet significant tax modifications.
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EV Purchase Incentives And A Driving Tax
- The government paired a 3p/mile EV driving tax with upfront EV purchase incentives at the same Budget.
- Because of the EV sales mandate, price changes adjust but the mandated share of EVs sold stays fixed.
Mandate Forces Price Not Share Adjustments
- The EV mandate forces manufacturers to adjust prices of EVs and petrol cars rather than change relative sales shares.
- That can shrink total car sales or shift prices, but not the mandated EV share.
Prepare For Employer-Driven Pension Changes
- Expect employers to respond to the salary sacrifice cap by changing how they offer pensions.
- Employers may replace individual schemes with higher employer contributions across the board, reducing worker choice.