UK Road Tax Changes in 2026 - What Drivers and Businesses Need to Know
The UK Government has introduced a series of important road tax and company car tax changes taking effect throughout 2026 and beyond. From Vehicle Excise Duty (VED) increases to evolving Benefit‑in‑Kind (BiK) rules for company cars, these updates will have wide‑ranging effects on motorists, fleet managers and employees alike.
Vehicle Excise Duty (Road Tax) - Key Updates for 2026
Annual VED Rises in Line With Inflation
From 1 April 2026, the standard Vehicle Excise Duty (road tax) rate for most cars will increase in line with inflation (RPI), rising from £195 to around £200 per year for typical post‑2017 vehicles - a modest but noticeable uplift for everyday drivers.
First‑Year VED Bands Remain
The emissions‑based first‑year rates (paid when a car is first registered) continue to apply in 2026/27, ranging from £10 for zero‑emission vehicles to thousands of pounds for high‑emission cars. These bands influence both private and company cars, affecting upfront taxation costs.
Expensive Car Supplement Threshold Increases for EVs
One of the standout changes is the rise in the Expensive Car Supplement (luxury car tax) threshold for zero‑emission vehicles: from £40,000 to £50,000, effective 1 April 2026. This means more electric vehicles will avoid the extra annual VED charge of £425. Petrol, diesel and hybrid cars keep the £40,000 threshold.
Electric Vehicles Are Now Fully Taxed
Electric cars are no longer exempt from VED. Most EVs now pay the standard rate (around £195) after their first year, aligning them with other cars under current road‑tax rules.
Future Changes Loom: eVED from 2028
A new pay‑per‑mile Electric Vehicle Excise Duty (eVED) system is scheduled for April 2028, charging EV drivers based on miles driven (e.g. about 3p per mile for battery EVs). This reflects a longer‑term shift to ensure EV drivers contribute fairly as fuel duty revenue declines.
Company Car Tax (Benefit‑in‑Kind) - What’s New in 2026
Company cars receive special tax treatment because they are treated as taxable benefits when used privately. Here’s how the rules are evolving in 2026:
BiK Rate Increases Gradually Through 2026
The Benefit‑in‑Kind (BiK) taxable percentage for company cars will increase by 1 percentage point for each tax year, including 2026/27. For zero‑emission vehicles, this means the BiK rate will be 4 % in 2026/27 (up from 3 % in 2025/26). Higher‑emission cars also see increases but remain capped at 37 % maximum.
How BiK Is Calculated
We have ur very own guide on how to calculate BiK, which can be found here. In short, lower emissions vehicles receive lower percentages, so EVs and plug‑in hybrids remain attractive for tax planning - but the gap is narrowing.
Fuel & Van Benefit Charges Rise
From 6 April 2026, annual charges used to calculate the taxable value of fuel provided for private use and vans available privately will be uprated by inflation. The car fuel benefit multiplier increases to £29,200, and the van benefit charge to £4,170.
Employee Car Ownership Schemes Included
Draft legislation taking effect October 2026 will bring Employee Car Ownership Schemes (ECOS) into the scope of company car tax rules, so vehicles under these arrangements may be treated as taxable benefits.
What This Means for Drivers and Businesses
For Private Drivers
Expect slightly higher yearly road tax bills from April 2026.
Electric car owners are better shielded from expensive VED charges thanks to the higher £50,000 luxury threshold.
Older cars may face shifting tax bands, making it important to check the DVLA’s VED band for your vehicle.
For Fleet Managers & Employers
Planning for rising BiK percentages is crucial, especially if your fleet includes EVs or low‑emission cars.
Fuel benefit and van benefit charge increases affect payroll tax planning and total cost of providing vehicles.
Businesses should work with accountants to forecast taxable benefits in employee packages.
Planning Tips
Review fleet vehicle emissions and BiK schedules to optimise tax outcomes.
Consider the luxury car threshold change when purchasing EVs for staff use.
Stay updated on forthcoming policy changes such as the eVED pay‑per‑mile tax and automation of mileage reporting.
The 2026 UK road tax landscape marks an evolution rather than a revolution: inflation‑linked VED increases, changes to company car BiK rates, and a broader tax integration for EVs. Whether you’re a private driver, employer or fleet owner, understanding these updates now will help you plan ahead and optimise your vehicle costs in the years to come.
