The Autumn Budget has confirmed changes to company car tax, fuel duty, business mileage allowances and electric vehicle charging. For businesses running fleets and employees choosing their next company car, the announcements affect both day-to-day running costs and longer-term planning.

Electric cars continue to benefit from lower company car tax than higher-emission alternatives. However, rising Benefit-in-Kind rates and the introduction of mileage-based EV duty mean it is important to compare costs across the full length of a lease.

Here we explain the main announcements affecting company cars, salary sacrifice schemes, vans and business drivers, including measures announced previously and confirmed in this Budget

Company cars and salary sacrifice

Electric company car tax confirmed through to 2031

The Government has set Benefit-in-Kind (BiK) rates for the 2030/31 tax year. From 6 April 2030, the rate for zero-emission company cars will increase from 9% to 10%. The earlier increases shown below were already scheduled.

BiK is the percentage of a car’s P11D value used to calculate the taxable benefit. The employee then pays Income Tax on that benefit at their applicable tax rate.

For example, an electric company car with a £40,000 P11D value would create a £4,000 taxable benefit at 10%. A 20% taxpayer would pay £800 a year, or £66.67 a month; a 40% taxpayer would pay £1,600 a year, or £133.33 a month. These examples assume a full year of availability, no employee contributions and a constant tax rate.

Higher rates for hybrids and other company cars

For cars emitting 1–50g CO₂/km, including qualifying plug-in hybrids, the BiK rate will rise from 19% to 20% in 2030/31. Other vehicle bands will also increase by one percentage point, subject to a maximum of 40%. Businesses should compare the tax position over the full agreement, particularly where a lease extends into April 2030. 

EV salary sacrifice schemes continue

The Budget does not announce a new cap on EV car salary sacrifice schemes. Its reference to a salary sacrifice cap concerns pension contributions. Existing HMRC guidance continues to apply normal company car BiK valuation to cars emitting no more than 75g CO₂/km.

Employee savings still depend on their circumstances, the vehicle and the scheme.

Mandatory payrolling from April 2027

From 6 April 2027, employers will be required to report and payroll company cars, vans, car and van fuel benefits, and medical benefits through Real Time Information. Fleet, HR and payroll teams should check that vehicle allocations, taxable values and changes can be reported accurately.

Minimum wage increases affect scheme eligibility

From 1 April 2027, the National Living Wage will increase to £13.21 an hour. Rates will rise to £11.27 for 18–20-year-olds and £8.31 for 16–17-year-olds and eligible apprentices. Salary sacrifice must not reduce cash earnings below the applicable minimum wage, so employers should review both new applications and existing arrangements.

Fuel and charging costs

The 5p fuel duty cut is extended

The Government is extending the existing 5p-per-litre fuel duty cut for a further six months, until 1 July 2027. The planned Retail Prices Index (RPI) increase is also deferred until that date. 

This prevents a scheduled increase rather than introducing an additional 5p reduction. It provides continued support for petrol and diesel car and van fleets, although pump prices will still be affected by oil prices and other market conditions. Businesses should allow for a potential duty increase from July 2027.

Temporary electricity VAT cut supports home charging

The temporary 0% VAT rate on domestic electricity, introduced from 1 October 2026, will be extended for another three months, to 1 July 2027. The Budget states that UK-wide application is expected from April 2027. 

Drivers charging an electric company car, salary sacrifice car or van through their household electricity supply benefit during the relief period. Holding the underlying tariff constant, £100 of electricity before VAT costs £100 at 0%, compared with £105 at 5%. The relief is temporary and should not be assumed for the full lease term.

Public charging cost review leads to targeted support

The independent review of public EV charging costs, led by Philip New, has been published alongside the Budget. It examines the factors behind charging prices and identifies options to reduce costs for drivers.

From spring 2027, the Government will provide £100 million over two years to reduce costs at local, lower-powered public chargers across Great Britain. These include residential chargers where vehicles can remain connected for several hours or overnight. The Government estimates savings of around £150 a year for an average driver relying on the targeted chargers. This is an estimated saving, rather than a payment to every EV driver.

An industry-led taskforce will also explore “tariff porting”, allowing drivers to use their domestic electricity tariff at certain public chargers. Further details will follow. For employees without driveways, this could improve access to cheaper charging, but it is not yet an available nationwide service.

Public and workplace charging VAT remains separate

The Budget sets out legislation clarifying that electricity supplied through public and workplace EV charging points is subject to 20% VAT and is not domestic use for Climate Change Levy purposes, taking effect from 1 November 2026. The domestic electricity VAT relief does not extend to these charging supplies.

Businesses should review their charging arrangements and VAT treatment. The clarification should not be interpreted as a universal 20% increase in workplace charging prices.

Mileage charges and vehicle tax

Electric Vehicle Excise Duty from April 2028

Electric Vehicle Excise Duty (eVED), announced at Budget 2025, remains scheduled from 1 April 2028 alongside existing VED. Battery electric and hydrogen fuel cell cars will initially pay 3p per mile, while plug-in hybrid cars will pay 1.5p per mile. These rates are due to increase with CPI from 2029/30. The published measure applies to cars, including company and salary sacrifice cars, rather than vans.

This Budget adds plans for a mileage estimation tool, optional connected-vehicle reporting through eVED Connect, and automated refunds by 2030. Further guidance for fleets is expected later this year.

Higher allowances for drivers using their own vehicles

The 55p-per-mile allowance for the first 10,000 business miles, already applicable from 6 April 2026, is being made permanent. From 6 April 2027, the rate above 10,000 miles will increase from 25p to 35p. These rates cover qualifying business use of employees’ own cars and vans, with corresponding changes for self-employed simplified mileage.

These are not company car advisory fuel or electric rates. Employers can review their reimbursement policies; employees paid below the approved amount may be able to claim tax relief on the eligible shortfall. 

VED and taxable van benefits increase

VED rates for cars, vans and motorcycles will increase with RPI from 1 April 2027. Van benefit charges and car and van fuel benefit charges will increase with CPI from 6 April 2027. Where these benefits are taxable, the increases affect drivers and employers.

Business fleets and commercial vehicles

Changes to capital allowances

The main-rate first-year allowance will increase from 40% to 50% for qualifying expenditure incurred from 1 January 2027. The main writing-down allowance will reduce from 14% to 12% from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.

These changes affect the timing of tax relief on eligible investment. Cars have separate capital allowance rules, so the 50% allowance should not be applied automatically to all vehicles. Businesses should review purchase and leasing comparisons with their accountant.

HGV and red diesel support

The reduced £1 annual VED rate remains available for most HGVs under qualifying licences or renewals between 1 July 2026 and 30 June 2027. New provisions allow excess benefit beyond 12 months to be recovered. The HGV levy is also scheduled to rise with RPI from April 2027.

Temporary red diesel duty relief is extended to 1 July 2027 for qualifying users. This does not change the restrictions on which vehicles and activities can use red diesel.

Other measures for fleet operators and business drivers

Larger private hire operators will be liable for 20% VAT on the full fare under proposed rules from 2 January 2028. The turnover threshold will be consulted on, with £50 million the lead option.

Business travel and subsistence scale rates will be reformed from April 2028. The £2,500 Self Assessment employment expenses threshold will also be removed, allowing more employees to claim eligible unreimbursed expenses through PAYE.

The Budget records previously announced ten-year business rates relief for eligible EV charging points and EV-only forecourts from April 2026. It also confirms plans to publish the response to the Zero Emission Vehicle Mandate review by the end of 2026, with any changes intended from 2027. Eligible search and rescue charity vehicles will receive a VED exemption from April 2027.

Information reflects announcements published on 28 October 2026. Some measures require legislation or further guidance. Tax treatment depends on individual circumstances and may change. Please seek advice from your accountant or tax adviser before making financial decisions.

The full Budget 2026 document in print, web and HTML accessible versions: Budget 2026 document - GOV.UK