Fleet operators and professional drivers will need to prepare for a range of tax changes taking effect in 2026, with implications for company cars, vans, fuel costs and future electric vehicle taxation. These measures, confirmed through recent Budget announcements and draft legislation, will affect both business planning and driver take-home pay.
Company car tax changes
From April 2026, benefit-in-kind (BIK) tax rates for company cars will rise by one percentage point. Fully electric vehicles will attract a BIK rate of 4% in the 2026/27 tax year.
For a basic-rate taxpayer driving a £40,000 electric car, this equates to a monthly BIK cost increase from £20 to £26.67. While EVs remain comparatively tax-efficient, this represents a clear shift towards gradually higher costs.
PHEV BIK easement explained
The Government has confirmed a temporary BIK easement for certain plug-in hybrid electric vehicles affected by the new Euro 6e-bis emissions testing standard. During the easement period, eligible PHEVs will be treated as having nominal CO₂ emissions of 1g/km for BIK purposes.
This applies to vehicles:
- first registered on or after 1 January 2025
- with quoted CO₂ emissions of 51g/km or more
- registered under emission standards other than Euro 6d-ISC-FCM or Euro 6e
- offering an electric-only range of at least one mile
The easement runs until 5 April 2028 and is intended to prevent sudden tax increases for drivers during the transition to the new testing regime.
Vehicle excise duty updates
VED rates will rise in line with inflation from April 2026. The threshold for the expensive car supplement has increased from £40,000 to £50,000, offering some protection for higher-value EVs.
However, EVs registered from April 2025 remain subject to the luxury car surcharge, currently £425 per year from years two to six, increasing to £440 from April 2026. The threshold includes optional extras and is based on the manufacturer’s list price.
Fuel duty timeline
Fuel duty will remain frozen until September 2026. It will then increase in stages:
- 1p per litre from 1 September 2026
- a further 2p from 1 December 2026
- another 2p from 1 March 2027
The Office for Budget Responsibility estimates that freezing fuel duty has cost the Treasury around £100bn since 2011, with the latest extension costing £2.4bn in 2026/27 alone.
Van benefit and fuel benefit increases
From April 2026:
- the flat-rate van benefit charge rises from £4,020 to £4,170
- the car fuel benefit multiplier increases from £28,200 to £29,200
- the van fuel benefit charge rises from £769 to £798
These changes will affect both employers and drivers using company vans for private use.
First-year allowances for leased vans
A new 40% first-year capital allowance for leased vans came into force in January, closing a long-standing gap that excluded leased vehicles from first-year allowances. This change improves cashflow and offers greater flexibility for fleet operators considering leasing rather than outright purchase.
Future electric vehicle taxation
Although not due until 2028, the Government has confirmed plans for a new pay-per-mile tax for electric vehicles, including PHEVs. The proposed rates are:
- 3p per mile for battery electric vehicles
- 1.5p per mile for plug-in hybrids
With consultation now under way, Association of Fleet Professionals is encouraging fleets to respond, warning that early engagement is essential to address potential practical and administrative concerns.
Sourced via: Fleet News
