Budget 2026 — What the Tax Changes Mean for UK Motorists

The UK government's 2026 Budget brought several changes that directly affect motorists. Whether you drive a petrol car, an electric vehicle, or run a small fleet, here's what you need to know — and how smart finance can help manage the impact. ## Vehicle Excise Duty (VED) Changes **VED rates increased across the board** from April 2026. For most petrol and diesel cars registered after 2017, first-year rates have risen in line with RPI inflation. Key points: - Electric vehicles now attract standard VED rates (no longer exempt) — first introduced in 2025 and continuing in 2026 - Higher-value vehicles (over £40,000 list price) continue to attract a premium rate surcharge for years 2–6 - Classic cars (over 40 years old) remain exempt If you're buying a new vehicle, the **list price matters more than ever** — staying under the £40,000 threshold can save hundreds per year in tax. ## Fuel Duty The fuel duty freeze — which has been in place since 2022 — continues in 2026. This is good news for petrol and diesel drivers, keeping pump prices from rising due to duty changes (though global oil prices still move independently). ## Company Car Tax (Benefit in Kind) **BIK rates for electric company cars** rise incrementally through 2026–2028 as originally planned, moving from 3% in 2025 to 5% in 2026. This makes EVs still significantly cheaper as company cars than petrol or diesel equivalents (which attract 20–37%). For business owners and fleet managers, electric vehicles remain the most tax-efficient option. ## What This Means for Car Finance Higher VED and rising running costs make **choosing the right vehicle even more important** when financing a car. Consider: - **Total cost of ownership** — not just monthly payments, but tax, fuel, insurance - **EV vs ICE** — EVs carry lower BIK and increasingly competitive finance rates - **Balloon payments on PCP** — residual values are under pressure as EV adoption grows and ICE resale softens A broker like **We Finance Your Asset** can help structure a deal that makes financial sense across the full term — not just the monthly payment. --- Based in **Reading, Berkshire** and working with buyers and dealers **across the UK**, We Finance Your Asset keeps you informed about what market changes mean for your finance. Get in touch at **wefinanceyourasset.co.uk**.