A series of changes to vehicle taxation will take effect from April 2026, altering how much many drivers pay in road tax and related charges.
Some of these changes remove long-standing exemptions, while others increase existing charges in line with government policy. Although not every proposal reported in the media is settled law, several measures are now fixed and should be factored into forward planning.
This update sets out what is changing, what is already confirmed and how different categories of drivers are likely to be affected.
Electric vehicles will no longer be exempt from road tax
From April 2026, electric cars will no longer benefit from a zero-rate exemption from Vehicle Excise Duty. Instead, they will be brought into the standard VED system, removing the previous preferential treatment for zero-emission vehicles as their numbers increase.
Most electric vehicles will pay the flat standard rate, which is expected to sit at around £200 per year for the 2026 to 2027 tax year, subject to the final VED tables published by DVLA.
Mileage-based road pricing for electric vehicles remain policy discussions rather than confirmed tax changes.
| Vehicle type | VED position before April 2026 | VED position from April 2026 |
|---|---|---|
| Electric car (zero-emission) | Generally exempt from paying VED | Standard VED applies for licences starting on or after 1 April 2026 |
| Electric car above EV “expensive car” threshold | Generally exempt from paying VED, but rules vary by licence start date | Standard VED plus Expensive Car Supplement where the list price exceeds the EV threshold |
| Plug-in hybrid | VED payable, based on existing VED rules for non-zero-emission vehicles | VED payable under the same framework, with annual rate updates for 2026 to 2027 |
| Petrol or diesel car | VED payable, based on registration date, emissions and applicable bands | VED payable under the same framework, with annual rate updates for 2026 to 2027 |
Luxury car tax continues to apply, with a higher threshold for EVs
The Expensive Car Supplement, often referred to as the luxury car tax, will continue to apply from April 2026. Where a vehicle had a list price above £40,000 when first registered, an additional annual charge applies on top of standard VED for a fixed period.
For electric vehicles, the threshold increases to £50,000 from April 2026, as confirmed in Budget 2025. Electric cars with a list price above £40,000 but not exceeding £50,000 will therefore avoid the supplement when their licence starts on or after 1 April 2026.
For petrol, diesel and hybrid vehicles, the threshold remains £40,000. Where the supplement applies, it adds £425 per year, taking the total annual VED for affected vehicles to around £620 when combined with the standard rate.
VED increases for older, higher-emission vehicles
Cars registered between 1 March 2001 and 1 April 2017 continue to be taxed based on their CO₂ emissions bands. From April 2026, higher-emission bands are expected to rise broadly in line with inflation.
Under the projected rates for the 2026 to 2027 tax year, vehicles emitting more than 225g of CO₂ per kilometre face the steepest increases. Cars in the 226 to 255g/km band are expected to see annual VED rise from £735 to £760, while vehicles emitting more than 255g/km are expected to rise from £750 to £790.
Lower-emission bands see smaller increases, with some of the lowest bands remaining unchanged. The precise amount payable depends on the vehicle’s registration date, fuel type and emissions profile, and drivers should check their specific vehicle once DVLA publishes the final tables.
Cleaner Vehicle Discount is being scaled back
The existing 100% Cleaner Vehicle Discount is due to end on 25 December 2025. From that point, a reduced discount structure applies. The change increases the cost of driving electric vehicles in charging zones and reflects a broader move away from blanket exemptions.
Electric car drivers will be eligible for a 25% discount on the daily charge, while electric vans, HGVs and quadricycles qualify for a 50% discount. These discounts apply only where the vehicle owner is registered for Auto Pay.
Motability scheme changes
Separate changes affecting the Motability scheme will also feed into overall vehicle costs during 2026. High-end vehicles were removed from the scheme in November 2025, narrowing choice at the top end.
In addition, VAT will apply to Advance Payments from July 2026, and Insurance Premium Tax will apply to scheme insurance at the standard rate. Motability has estimated that these changes will increase the typical upfront cost by around £400 over a three-year lease. Vehicles that are significantly adapted for wheelchair users are excluded from the tax changes.
Benefit in Kind rates continue to rise
For company car drivers, Benefit in Kind rates will increase again in the 2026 to 2027 tax year under the existing annual escalator.
From 6 April 2026, electric vehicles move to a 4% BiK rate, up from 3%. BiK rates continue to increase with CO₂ emissions, reaching a maximum of 37% for higher-emission vehicles. These changes affect salary sacrifice arrangements and employer-provided cars rather than privately owned vehicles.
| Vehicle type | BiK rate 2025–26 | BiK rate 2026–27 | What this means in practice |
|---|---|---|---|
| Electric vehicle (zero emission) | 3% | 4% | Higher taxable benefit for company car and salary sacrifice users from April 2026 |
| Ultra-low emission vehicle | Rate based on CO₂ emissions band | Rate increases in line with the 2026–27 BiK tables | Small increases in BiK where emissions remain low but not zero |
| Petrol or diesel company car | Rate based on CO₂ emissions band | Rate increases under the annual BiK escalator | Higher emissions translate directly into higher personal tax liability |
| High-emission company car | Up to 37% | Up to 37% | Top rate remains unchanged, but applies to a wider cost base over time |
Planning ahead
The car tax changes taking effect in April 2026 reflect a broader recalibration of motoring taxation. Exemptions are being withdrawn, and costs are rising most sharply for higher-value and higher-emission vehicles.
For drivers considering a change of vehicle, the timing of registration, list price and emissions profile will continue to have a direct impact on annual tax bills. Checking the official DVLA vehicle tax rates once published for the 2026 to 2027 tax year remains the safest way to confirm the position for any specific car.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
