UK Tax Changes for Fleets in 2025/26: How will your fleet be impacted?
As the UK government continues to refine tax policy in support of its net-zero goals, several key changes will come into effect in the 2025/26 tax year that will impact fleet operators, company car drivers, and vehicle procurement strategies.
From the removal of VED exemptions for electric vehicles to major changes in how pickups are taxed, here’s what fleet professionals need to watch out for.
1. Benefit-in-Kind (BIK) Tax Changes
Rates confirmed up to 2027/28 – but no changes in 2025/26 vs 2024/25.
Electric Vehicles (EVs) remain highly attractive with a BIK rate of 2% until 2024/25, rising by 1% each year thereafter:
2025/26: 3%
2026/27: 4%
2027/28: 5%
Plug-in Hybrid Vehicles (PHEVs) BIK rates will depend on electric range and CO₂ output. They also rise incrementally.
🔍 Impact: EVs continue to offer the lowest company car tax bills — good news for fleet electrification strategies.
🚙 2. Vehicle Excise Duty (VED) Changes – From April 2025
EVs will no longer be exempt from VED:
First-year VED: £10
Standard rate from year 2: £195 (same as petrol/diesel cars)
Cars emitting 1–50g/km CO₂ (e.g. PHEVs) will pay £110 in year 1.
Rates escalate based on emissions — up to £5,490 for cars emitting over 255g/km CO₂.
Expensive Car Supplement of £390/year will apply to EVs costing over £40,000, starting in year 2.
🔍 Impact: Fleets may face higher costs for EVs, especially premium models. Still, EVs remain cheaper overall for BIK.
🔧 3. Capital Allowances for Pickups (from April 2025)
Double Cab Pickups (with rear seats) will be reclassified as cars — not vans — for tax purposes.
Businesses will no longer qualify for 100% Annual Investment Allowance (AIA) or full expensing.
They’ll instead get 6% writing-down allowance, like other company cars.
🔍 Impact: Pickup trucks lose their tax-efficient appeal for many business users. Expect a review of vehicle policies.
💰 4. Corporation Tax:
Remains at 25% for companies with profits over £250,000.
Still an incentive for companies to claim allowances like full expensing (on qualifying vans/cars pre-2025 rules).
Summary for Fleets:
Area2025/26 ChangeImpact on FleetsBIK on EVs/PHEVs+1% increase per yearSlight rise in tax bills for company driversVED for EVsEVs start paying VEDHigher whole-life costs, especially for premium EVsPickupsReclassified as carsReduced capital allowance efficiencyCapital AllowancesFull expensing still applies (non-pickups)Encourages fleet investment in 2024/25Expensive Car Surcharge£390/year applies to EVs over £40kCost consideration for premium EVs