This measure will exempt all registered zero-emission light passenger vehicles registered from 1 April 2017 until 31 March 2025 from the vehicle excise duty (VED) supplement.

This affects cars with a list price exceeding £40,000, starting from April 2020, for example a Tesla Model 3 which costs around £39,000 without extras.

The government is also considering the long-term future of incentives for zero emission vehicles alongside the 2040 phase-out date consultation. Until then, the government will provide £403m for the Plug-in Car Grant, extending it to 2022-23.

Recognising that the market for other ultra-low emission vehicles is still very small, the government will also provide £129.5m to extend the Plug-in Grants for vans, taxis and motorcycles to 2022-23.

This will cost the government £10m in tax relief from 2020-21 and a total of £120m over the next five years.

Mark Sinclair, chief financial officer, TMC, said: ‘It's good to hear a budget that is more supportive of the key role business vehicles and their drivers play in growing the economy than we have had in the last few years.

‘The Chancellor may have felt a temptation to take advantage of the dip in pump prices to raise fuel duties, but keeping them frozen was very much the right response in the circumstances. And as the industry prepares for the initial costs of transitioning to electric energy, it is good news to see CCT being frozen for another two years to 2024/25.

‘On infrastructure, the additional funding for charging networks, roads and transport to reduce congestion, improve mobility and encourage fleets to take-up zero emission vehicles is very welcome.

‘We will have to wait to see how many of the budget measures really are new money but at least there now looks to be a very welcome extra £500m a year dedicated to fixing potholes and resurfacing.’

Budget 2020: road tax increases

The government will uprate Vehicle Excise Duty rates for cars, vans and motorcycles in line with RPI from 1 April 2020.

Increasing VED rates by RPI in 2020 to 2021 will ensure that VED receipts are maintained in real terms and that motorists make a fair contribution to the public finances.

To support the haulage sector, the government will freeze HGV VED and the HGV Road User Levy for 2020-21.

This measure is expected to have a negligible impact on businesses, which own or sell vans, car or motorcycles by a change in their VED liabilities.

One-off costs include familiarisation with the rate change. There are not expected to be any ongoing costs.