Budget 2026: The key points and impact for fleets and drivers

Chancellor John Healey has delivered his first Budget. We look at what it means for fleets and drivers, including company car tax, mileage allowances and EV charging costs.

What’s the Budget impact on Benefit in Kind (BiK) rates?

Company car BiK rates for zero-emission vehicles are already set up to and including the 2029/30 tax year. The rate is 4% in 2026/27, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.

The Budget confirmed rates for 2030/31. These will be one percentage point higher than in 2029/30 across all vehicle bands, subject to a maximum of 40%:

• Zero-emission vehicles: from 9% to 10%.
• Cars emitting 1 to 50g/km of CO?: from 19% to 20%.
• All other bands: an increase of one percentage point, up to a maximum of 40%.

The BiK rate is applied to the car’s taxable value to calculate the benefit. The tax a driver pays on that benefit depends on their individual income tax rate.

What’s happening with mandatory company car payrolling?

The previously announced introduction of mandatory payrolling for company cars, vans, fuel and medical benefits is due to take effect from 6 April 2027.

Employers will generally need to report these benefits and deduct the tax through their payroll systems, rather than reporting them annually through a P11D. Most other benefits will follow from April 2028.

What’s the impact on fuel duty and Approved Mileage Allowance Payments?

Fuel duty: The temporary 5p-per-litre fuel duty cut has been extended until 1 July 2027, providing short-term support for drivers and businesses running petrol and diesel vehicles.

Mileage allowances: The Government has confirmed changes to the tax-free mileage rates for people using their own car or van for business journeys:

• First 10,000 business miles in a tax year: The rate increased from 45p to 55p per mile from 6 April 2026. This increase has now been made permanent.
• Business miles above 10,000: The rate will increase from 25p to 35p per mile from 6 April 2027.

These are tax-free allowance rates, rather than amounts employers are required to pay.

Does the Budget provide relief on EV charging?

Home charging: VAT on qualifying domestic electricity in Great Britain was reduced from 5% to 0% on 1 October 2026. The Budget extended the reduction until 30 June 2027, which will continue to reduce the cost of home charging.

The Government expects the extended VAT relief to apply in Northern Ireland from April 2027.

Public charging: Electricity supplied through public charge points remains subject to 20% VAT. The Government is establishing a taskforce to explore whether drivers could use their domestic electricity tariff at local, lower-powered public charge points.

It has also announced £100 million over two years to reduce the cost of local, lower-powered public charging, with support expected to take effect from spring 2027.

What’s happening with Electric Vehicle Excise Duty?

The Budget provided further information on the previously announced mileage-based charge for electric vehicles, known as Electric Vehicle Excise Duty (eVED).

From 1 April 2028, the charge will apply to electric, plug-in hybrid and hydrogen fuel-cell cars, alongside standard Vehicle Excise Duty. The initial rates will be:

• Fully electric and hydrogen fuel-cell cars: 3p per mile.
• Plug-in hybrid cars: 1.5p per mile.

The rates are scheduled to increase in line with Consumer Prices Inflation from 2029/30.

The Government intends to introduce arrangements for leasing and rental businesses, including the ability to estimate mileage centrally. Details are still being developed.