UK Car Tax Changes April 2026 Explained
UK car tax changes April 2026 will affect millions of drivers and businesses. From 1 April, the Government will introduce increases to Vehicle Excise Duty rates, updates to electric vehicle taxation, changes to company car Benefit in Kind and the continued application of the historic vehicle exemption.
Whether you drive privately, manage a fleet or run a company car scheme, understanding these changes now will help you plan ahead.
Standard car tax changes from April 2026
Vehicle Excise Duty, often referred to as car tax or road tax, will increase in line with inflation from 1 April 2026. For most cars first registered after 1 April 2017, the standard annual rate will rise from £195 to around £200 per year.
If you own a petrol, diesel or hybrid car registered after April 2017, this flat rate applies regardless of emissions after the first year. While an increase of a few pounds may not seem significant on its own, it contributes to the overall cost of running a vehicle, particularly when combined with insurance, servicing and fuel.
For vehicles registered before the 1st of April 2017, tax remains linked to emissions bands. Many lower-emission vehicles in this category attract relatively modest annual rates, but these will also reflect inflation linked increases.
If you are budgeting for personal motoring or managing vehicle costs for your business, these changes are worth factoring into your 2026 projections.
Find the official vehicle tax rates on the government website.
Electric vehicle tax from April 2026
Electric vehicles no longer benefit from full exemption from car tax. From April 2025, electric vehicles began paying Vehicle Excise Duty, and the 2026 structure continues that approach.
New electric vehicles pay a reduced first year rate, then move to the standard annual rate in subsequent years. From April 2026, this means most electric cars will pay the same standard rate as petrol and diesel vehicles after their first year.
There is also an important update to the Expensive Car Supplement threshold. This threshold determines whether vehicles with a higher list price must pay an additional annual charge of £425 for five years. From April 2026, the threshold for zero-emission vehicles increases from £40,000 to £50,000. This change means more mid-range electric vehicles will avoid the additional annual supplement.
For individuals considering switching to electric and for businesses operating electric fleets, this adjustment may reduce the overall tax burden on certain vehicles. However, electric vehicles are no longer entirely free from ongoing taxation, and this should form part of your wider cost assessment.
Company cars and Benefit in Kind changes
Company car drivers will also see changes from April 2026. The Benefit in Kind rate for electric company cars increases from 3 percent to 4 percent.
While electric company cars remain significantly more tax efficient than many petrol or diesel alternatives, this increase means employees will pay slightly more tax on the benefit of using an employer provided electric vehicle.
For businesses operating company car schemes or salary sacrifice arrangements, this change should be reviewed alongside fleet planning and employee communications. Even small percentage increases can affect total tax liabilities across larger fleets.
Cars registered before April 2017
If you own a car registered before 1 April 2017, your tax is usually based on its CO2 emissions band. Many older low emission vehicles attract lower annual rates than newer cars on the flat rate system.
However, rates remain subject to annual increases. If you are keeping an older vehicle as part of your personal transport or company fleet, it is sensible to review how tax compares against running and maintenance costs overall.
Historic vehicles and the 40 year exemption
Since 2014, vehicles that are over 40 years old qualify for the historic vehicle tax class. This uses a rolling 40 year rule, meaning that each year on 1 April, another year of vehicles becomes eligible. In 2018, the act was also extended to exempt these vehicles from MOT testing.
Once a vehicle qualifies and the registered keeper applies to change its tax class with the Driver and Vehicle Licensing Agency, the annual Vehicle Excise Duty becomes £0. The vehicle must still be taxed each year, but no payment is required once it is recorded in the historic tax class.
This exemption does not apply automatically. Owners must update the tax class and ensure the vehicle meets the eligibility criteria. For classic car owners, this can represent a significant saving, but it remains important to check the build date and registration details carefully. You can check eligibility and how to apply for historic vehicle tax class on GOV.UK.
What these car tax changes mean for you
Changes to vehicle tax are another reminder that the cost of running a car continues to evolve. Whether you drive privately, manage a fleet or operate a company car scheme, small changes can influence bigger decisions over time.
If you are considering changing vehicles, moving to electric or reviewing how your business vehicles are structured, it is sensible to look at your insurance at the same time. Decisions around vehicle value, finance and replacement costs can also affect whether additional protection, such as GAP insurance, is appropriate.
If you are already a client, your dedicated broker will be happy to talk things through. If you are not yet with us and would like to explore personal motor or fleet cover, our team are always happy to talk you through your options.
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