As the UK’s leading providers of truck and logistics insurance, we watch industry developments closely. Whether it’s the transition to electric HGV fleets or the increasing threat of cyber-attacks on logistics companies, we keep our finger on the pulse. What’s attracting our attention now is the Autumn Budget.
This year’s Budget will be watched closely by all businesses, but the logistics sector needs to pay particular attention. There are some big potential changes afoot, including:
- Increased fuel costs thanks to the end of the duty freeze
- An increase in Insurance Premium Tax (IPT)
- Vehicle tax rises and the introduction of road charging
- National insurance rises
- Increased business rates
- A tightening of emissions restrictions
- The impact it could have on third-party logistics (3PL)
So, what does the Budget hold for logistics firms and truck owners, and what can you do to protect your business from these potential changes? In this blog, we’ll examine the most likely changes, and our team of logistics insurance experts will offer their tips on keeping your business on the road.
We hope this will prove helpful. If you’d like some logistics insurance help or a logistics insurance quote, then please get in touch. You can call us on 01482 434343 or get a quote here.
End Of The Fuel Duty Freeze?
Arguably, the greatest concern for logistics firms, couriers, and hauliers ahead of the Budget is what will happen to fuel duty. It has been frozen since 2011, a reduction that has cost the Treasury over £133 billion, based on figures from the Office for Budget Responsibility (OBR). This has been made worse by the rise of electric vehicles and the loss of fuel duties. While historical figures haven’t been released, estimates from This is Money suggest a £5 billion annual loss in fuel duty receipts by 2028, rising to £9 billion by 2030. Analysts seem certain that a change is on the way as the Chancellor seeks ways to raise funds.
The logistics sector is overwhelmingly powered by diesel. Unlike cars, where 5.1% are now electric (Department of Transport figures), electric trucks remain scarce. Latest figures suggest that there are around 1,271 electric HGVs in the UK out of a fleet of over 625,000. With a single HGV, running costs are between £20,000 to £60,000 per year to fuel; even a small increase in fuel duty could be catastrophic, especially for HGV fleet owners.
Some experts believe, however, that the public backlash would be too much and that changes will come in a year’s time. Government sources have hinted that a phased increase or even a road-charging pilot could be on the way. While road charging isn’t official policy yet, it’s being discussed as a possible option to replace the predicted £30 billion in lost fuel duty and Vehicle Excise Duty (VED) revenue as more drivers switch to electric vehicles (EVs).
Others have suggested that there may be an exemption for the hauliers. The industry is worth £13.5 billion to the UK economy annually, representing 5.6% of the UK’s GDP (RHA), and it’s struggling. UK haulage sector inflation, a shortage of drivers, intense competition and extra paperwork post-Brexit have made for hard times. The prospect of mass disruption, closures and job losses could well stay the Chancellor’s hand. Our prediction is that the freeze will be extended for another year. Let’s hope we’re right!
National Insurance Rises
One of the biggest concerns for delivery firms is the prospect of rising employment costs. After the Spring Budget’s increase in employer National Insurance Contributions (NICs), rumours are circulating that the Chancellor may hold or slightly raise rates again or freeze the threshold at which NICs are paid. For logistics firms, businesses employing drivers or warehouse staff, even a 0.5% rise could add thousands to annual wage bills. For example, a business with 25 HGV drivers earning an average of £60,000 could face an additional £7,000–£10,000 in NIC costs.
Another thing to watch out for is a rise in the National Minimum Wage (NWM). While it rose in April, inflationary pressures have led to calls for another rise in the Budget. This won’t affect drivers, but it could have a big effect on the costs of employing people, such as warehouse staff and admin staff. If they decide to raise the National Living Wage (NLW), then that could put pressure on fulfilment centre staff, courier firms and third-party logistics providers, as well as depot and warehouse operations teams.
Business Rates
The government has hinted that business rates reform could feature prominently in the Budget. Retailers and other business owners have been pushing for this for years, and it was a manifesto pledge. The logistics industry has expressed concern that it may end up footing more of the bill if relief shifts away from warehousing and industrial spaces.
For logistics firms operating from depots, sorting hubs, or fulfilment centres, even a 5–10% increase in business rates could significantly raise fixed costs. With margins stretched, this could drive smaller firms out of business and see more consolidation amongst the major players. Warehouses and distribution hubs already carry some of the highest business rates in the UK, making any change in rates a major issue for the logistics sector.
Potential reforms include:
- Updated rateable valuations
- Higher rates in high-demand logistics zones
- Potential changes to industrial property taxes
The industry has warned against changes. Competition for things like warehousing space has pushed prices up, and an extra layer of cost could prove damaging.
An Increase in Vehicle Excise Duty (VED)
Vehicle Excise Duty (VED) for vans is likely to rise in line with inflation, currently at 4.1%. While a 4.1% means £36.12 extra a year for the heaviest trucks, and that’s assuming there are no changes to the HGV levy. While this is a modest increase, if you have an HGV fleet of, say, 20 lorries, then that’s another £722 to find.
It seems likely that VED will eventually be scrapped and replaced by road pricing. Hauliers and logistics companies could be hit hard by this as they do more mileage than the average car driver, between 50,000 and 125,000 miles per year, versus 7,000-7,6000 (Department of Transport). Their vehicles are also much heavier and will become even more so as more switch to electric HGVs, and these will attract even higher charges.
It’s likely that VED will eventually be scrapped and replaced by road pricing, VED+. VED+ is the proposed pay-per-mile tax for electric vehicles (EVs). This new system is widely expected to be introduced by Rachel Reeves and involves a 3 pence per mile charge for EV owners, costing an average driver about £250 a year. The new tax is planned to be implemented in 2028, requiring monitoring devices in vehicles. Electric vans will be exempt, and it seems likely that electric trucks (eHGVs) will also be exempt, in the short term at least.
Insurance Premium Tax Rise
Insurance Premium Tax (IPT) is a tax levied on most insurance policies. At present, it stands at 12% and raises just under £9bn per year. A modest 1.5% rise would generate £135m per year but push the cost of an average HGV insurance quote up by £90 per year. The insurance industry has pushed hard against a rise, citing that it has risen from 5% to 12% since 2010. There is hope that this year, at least, a rise will be avoided. Should a rise be announced, drivers would be wise to get an HGV insurance quote and renew early to beat the rise.
A Tightening of Emissions Restrictions
Successive Chancellors have looked to reduce vehicle emissions, and more changes are likely to come, including:
- Higher duty for older, more polluting trucks
- Potentially higher VED for zero-emission lorries
- Road charging trials
- More details on carbon budgets
While some of these measures could prove costly/inconvenient, they are necessary. The government has a legal requirement to reduce the UK’s emissions and, as we have said, the existing VED system needs reforming. The market is also demanding greener deliveries. A 2024 Royal Mail survey found that 23% to 27% of UK consumers are willing to pay more for green deliveries.
There may be some good news here, though. The government is committed to net-zero transport, and many industry watchers are expecting support for that goal. Specific measures likely to be announced include:
- More EV charging points and support for eHGV charging
- Hydrogen refuelling pilot investments
- Grants for fleet electrification
- Support for clean technology research
- Funding for sustainable warehousing
While some will, rightly, point out that these projects are largely about the future and that help is needed now, they could pay significant dividends. Electric vehicles are 40-50% cheaper to fuel, and if hydrogen can be made safe, it would be a game-changer for the logistics industry. Both will take time, but the sooner the government acts, the better.
Increased Transport Infrastructure Spending in the 2025 Autumn Budget
Congestion and potholes cost UK logistics £30bn per year, according to the Road Haulage Association (RHA). We’ve lost count of the number of conversations we’ve had with truck insurance clients over pothole repairs. Repairs to an HGV cost around £600, but the cost of losing a no-claims bonus can be significantly higher.
In response to this, the Chancellor is expected to inject a further £500 million for road maintenance and announce increased investment in strategic road networks. There are likely to be additions to its already announced 10-year infrastructure plan. These will probably involve investments in ports, rail, and general multimodal connectivity. Improvements may also include:
- Expanded rail freight opportunities with an emphasis on linking road and rail
- More port capacity investment to enable free ports like Hull to do more business
- Enhanced multimodal transport links
Capital Investment: Tax Relief for Fleet and Warehouse Upgrades
The government is expected to continue its policy of encouraging business investment through “full expensing”. This will allow firms to claim 100% tax relief on qualifying capital investments, including leased vehicles and equipment. For logistics firms, this is a real opportunity. It means that investing in new vehicle fleets, depot technology such as warehouse automation, robotics, and AI-driven fulfilment could significantly reduce taxable profits in the year of purchase. While this will benefit larger delivery firms as they’ll have the cash/profits to make the investment, it will help smaller firms too.’
For example, say a business invests £125,000 in leased electric vans. They could offset that entire amount against profits, potentially saving £23,750 in corporation tax, based on its remaining at 19%.
What the 2025 Autumn Budget Means for the UK Logistics Sector
The Budget always raises concerns for business. And while no one is expecting a giveaway, it will bring positive as well as negative announcements. We’re expecting:
Positive Impacts
- Fuel duty freeze
- Infrastructure investment
- Capital allowances for fleet upgrades
- Support for clean transport innovation
Negative Impacts
- Potential NIC increases
- Higher business rates for warehouses
- Rising wage pressures
- Significant decarbonisation costs for SMEs
Conclusion: How can UK Logistics Firms Prepare for the Impact of the 2025 Autumn Budget
To stay competitive, logistics operators should begin planning for the Budget by:
- Modelling labour cost increases
- Exploring fleet electrification grants
- Reviewing warehouse business rate exposure
- Building scenarios for potential (likely!) fuel duty changes
- Reassessing long-term supply chain strategy
- Investing in automation and digital optimisation
The 2025 Autumn Budget will shape the logistics landscape for years to come. Companies that prepare early—and take advantage of infrastructure investment and tax incentives—will be better positioned to thrive.
Like some logistics insurance help?
If you’d like some personalised advice on getting cheaper logistics or HGV insurance or a logistics insurance quote, please call us on 01733 915 050 or request a callback. You may also find our truck insurance guide useful.
