Car tax in the UK is undergoing a significant shift, particularly for electric vehicle (EV) owners. From 2026, various adjustments to the Vehicle Excise Duty (VED) and Benefit-in-Kind (BiK) tax rates will affect drivers across the country. This guide breaks down what’s changing, why it’s happening, and how it impacts motorists, businesses, and car buyers.
What is Changing in the UK Car Tax System From 2026?
Starting in April 2026, the UK government is implementing widespread reforms to car taxation. The most significant change is that electric vehicles (EVs), which have been exempt from Vehicle Excise Duty (VED), will begin to incur tax charges similar to petrol and diesel vehicles.
Currently, EVs benefit from zero VED rates and favourable company car tax incentives. However, as their market share grows, the UK Treasury is adjusting tax policy to maintain revenue from motorists.
By 2026:
- EVs registered on or after 1 April 2025 will begin paying the standard VED rate from their second year.
- Zero Emission Vehicles (ZEVs) will no longer be exempt from the Expensive Car Supplement.
- Company car BiK rates will continue rising incrementally, including for low-emission and electric models.
Why Are These Car Tax Reforms Being Introduced in the UK?
The government’s motivation is twofold: environmental commitment and fiscal sustainability.
First, as part of the Net Zero by 2050 agenda, vehicle taxation is being aligned with broader carbon reduction goals. Policies aim to encourage the use of cleaner vehicles while maintaining fairness between owners of different vehicle types.
Second, as fuel duty revenue declines due to the increasing popularity of EVs, the government seeks to recoup lost funds by introducing tax parity between electric and combustion engine vehicles.
These changes were formally announced in the Autumn Statement 2022 and are part of the Transport Decarbonisation Plan.
How Will Vehicle Excise Duty (VED) Change for Electric Vehicles?
VED will apply to electric cars for the first time in over a decade. As of April 2026, EVs will be taxed under the same structure as petrol and diesel vehicles.
| Vehicle Type | Registration Date | VED Year 1 | VED Year 2+ |
| Battery Electric Vehicle (BEV) | Before April 2025 | £0 | £0 (until April 2026) |
| Battery Electric Vehicle (BEV) | After April 2025 | £10 (First year rate) | Standard rate (~£190) |
| Plug-in Hybrid (PHEV) | Ongoing | CO₂ based | Standard rate + supplement if applicable |
| ICE Vehicles | Ongoing | CO₂ based | Standard rate |
In addition:
- EVs valued over £40,000 will no longer be exempt from the Expensive Car Supplement, which adds £390 per year for 5 years.
- First-year VED will continue to be based on emissions for ICE and hybrid vehicles.
What Are the Updates to Company Car Tax From 2026?
For businesses and fleet owners, Benefit-in-Kind (BiK) tax rates are evolving. These rates, applied to employees using company cars for private use, favour EVs but are gradually increasing.
- In 2024/25, zero-emission cars face a 2% BiK rate.
- This rate will increase by 1% each tax year from 2025 to 2028.
By 2026, EVs will have a 4% BiK rate. While still favourable compared to higher-emission vehicles, this gradual increase reflects the government’s move to balance incentives with tax parity.
Will Road Tax for Petrol and Diesel Cars Increase in 2026?
While no dramatic increase has been confirmed for 2026, traditional petrol and diesel vehicles are still subject to rising VED bands, especially for high-emission models.
The first-year VED continues to be emissions-based, while ongoing annual charges typically sit at £190 for standard vehicles.
Fuel duty another significant cost for drivers has been temporarily frozen in previous budgets. However, speculation continues that it may rise in future fiscal years to offset EV revenue gaps.
How Do These Car Tax Changes Affect Used Car Buyers?
The second-hand market will experience indirect effects from the 2026 changes.
Electric cars bought second-hand may offer continued savings if originally registered before April 2025, as these vehicles could remain under older VED rules for some time. However, newer EVs will carry standard VED rates, possibly reducing resale appeal.
Used diesel and petrol vehicles will remain under their original tax bands, which can be a consideration for long-term ownership costs.
What Are the Exemptions or Reliefs Under the New Tax System?
Certain exemptions will remain in place under the revised 2026 tax system:
- Disabled drivers will continue to receive VED relief under current eligibility rules.
- Historic vehicles over 40 years old remain exempt.
- Vehicles such as motorhomes, commercial vans, and mopeds may fall under separate tax categories.
However, most new private cars, including EVs, will no longer benefit from previous incentives after 2026.
How Can UK Drivers Prepare for the 2026 Car Tax Reforms?
Drivers planning to switch to an electric vehicle should consider purchasing before April 2025, if aiming to avoid initial tax costs. Businesses should also evaluate fleet choices in advance, especially where BiK is a concern.
Monitoring updates from HMRC and DVLA, as well as checking VED and BiK rates annually, is essential. For some, it may make sense to buy used EVs registered prior to tax implementation dates to minimise ongoing expenses.
What Are the Official Sources and Timelines for These Tax Changes?
The following timeline provides clarity on implementation:
| Date | Change |
| April 2025 | EVs start paying first-year VED (£10) |
| April 2026 | EVs pay standard VED (~£190) and Expensive Car Supplement |
| 2025–2028 | BiK rates increase by 1% each year for zero-emission cars |
Authoritative sources include:
- UK Government Autumn Statement 2022
- HMRC official tax policy notes
- DVLA vehicle tax guidance
- Transport Decarbonisation Plan
How Are Experts and UK Drivers Responding to the 2026 Car Tax Changes?
The UK’s 2026 car tax reforms mark a turning point in how drivers are taxed and the reaction has been swift. While industry experts acknowledge the need for a modernised, sustainable system, many motorists see the changes as yet another financial strain. Here’s what both sides are saying.
Experts & Industry Insights
Experts describe the reforms as a clear signal that the UK is shifting from generous EV incentives to a “user pays” model reflecting rising electric vehicle adoption and falling fuel duty revenue.
VED & Inflation:
From April 2026, Vehicle Excise Duty (VED) rates for petrol, diesel, and electric vehicles will be revised in line with the Retail Price Index (RPI). This routine inflation-based update is projected to result in higher increases than in previous years, pushing up the cost of vehicle ownership across the board.
Electric Vehicles:
EVs are now fully integrated into the tax system. However, raising the Expensive Car Supplement (ECS) threshold from £40,000 to £50,000 is seen as a welcome update, exempting more zero-emission vehicles from the extra charge.
Eurig Druce, Managing Director at Stellantis UK, has called for a wider tax review to support EV adoption and reduce ownership barriers.
Company Car Tax (BiK):
The Benefit-in-Kind rate for electric company cars will rise from 3% to 4% in April 2026, giving fleets clarity on cost forecasting.
But Thom Groot, CEO of The Electric Car Scheme, warns that higher BiK rates send “conflicting messages” at a time when salary sacrifice schemes have been vital to EV growth.
Fuel Duty:
The long-standing fuel duty freeze is set to end in September 2026, with phased increases likely to raise pump prices.
Edmund King, President of the AA, says drivers are being left at a “fork in the road”, stressing the need for a “fair and transparent system” especially as talk of pay-per-mile charging emerges.
Market Impact:
Sue Robinson, Chief Executive of the NFDA, has criticised the government’s projections, calling the reform a “misguided tax raid” that could reduce new car sales and damage long-term tax revenue.
Motorist & Public Reaction
While experts debate the economics, drivers on the road are focused on one thing cost.
“Tax Hike” Headlines:
UK media outlets are describing the reforms with headlines like “Drivers hit with new tax hikes” and “More charges coming in 2026”, stoking public concern about mounting motoring costs.
EV Owner Frustration:
Many EV drivers feel they’re being penalised after years of tax incentives. The shift to standard VED rates, combined with possible pay-per-mile charges from 2028, raises doubts about long-term affordability.
Everyday Expenses:
Traditional petrol and diesel drivers may face £20–£30 increases in VED.
Motability scheme users could see upfront costs rise by £400, due to VAT-related changes on vehicle adaptations and leases.
Compliance Crackdown:
Sarah Jenkins, Marketing Executive at My Car Reg Check, warns that with automated systems tightening, outdated records and unregistered changes could result in fines:
“Ignorance is no longer a defence.”
Conclusion
The 2026 car tax reforms mark a turning point in UK vehicle policy. For the first time, electric vehicles will be taxed like their combustion engine counterparts, with changes to VED and BiK structures.
While these reforms aim to ensure fairness and fiscal sustainability, they also signal the end of certain EV incentives. Whether you’re a private driver or a fleet manager, understanding these changes now is crucial for informed vehicle decisions in the years ahead.
FAQs About UK Car Tax Changes in 2026
Will electric vehicles still be cheaper to run after the 2026 tax changes?
Yes, EVs will still have lower running costs in terms of fuel and maintenance, but the gap will narrow due to the introduction of VED and BiK increases.
Is there a way to avoid the new car tax if I buy an EV before 2026?
If you purchase an EV registered before 1 April 2025, you may avoid the standard VED for a limited period. However, full taxation applies from April 2026 regardless of registration date.
Do the changes affect plug-in hybrids (PHEVs)?
Yes, PHEVs are taxed based on CO₂ emissions and may be affected by rising BiK rates and Expensive Car Supplement if valued over £40,000.
Are commercial vehicles included in the 2026 reforms?
Some commercial EVs and vans may have different tax treatments. Businesses should consult HMRC’s guidance for commercial vehicle taxation.
Will fuel duty increase alongside VED changes?
While not confirmed for 2026, future fuel duty increases are possible as the Treasury seeks to recover lost EV revenue.
What is the Expensive Car Supplement and who pays it?
It’s an additional £390 yearly charge on cars with a list price over £40,000. From 2026, EVs will also be subject to this charge.
How often are VED rates reviewed or updated?
VED rates typically change annually in the UK budget. It’s important to check HMRC or DVLA updates each tax year.