Car tax changes 2026: VED hikes and BIK rises affect drivers and fleets

Why car tax changes 2026 matter

Car tax changes 2026 will affect private buyers, company car users and fleet managers. Changes to Vehicle Excise Duty (VED) and benefit‑in‑kind (BIK) rules can alter purchase costs, monthly running expenses and take‑home pay for employees using company cars. With adjustments coming in April 2026 and wider tax moves at the start of the year, drivers and employers will need to reassess costs and budgeting.

Main changes and facts

VED increases for nearly 60 models

According to reporting in The Independent, first‑year VED rates for some vehicles have risen for the 2026 financial year. The first‑year VED amount has increased from £5,490 to £5,690 for a group of cars, affecting a total of 59 models. The rise of £200 will apply from April 2026 and is likely to be most noticeable for buyers of higher‑emission or premium models that attract first‑year VED charges.

BIK rise for company cars

From April 2026, benefit‑in‑kind (BIK) tax rates for company cars will increase by one percentage point. The change will affect employees who receive a company car as part of their remuneration and is relevant for fleet operators who manage taxable car benefits. Reporting indicates that fully electric vehicles will also attract a BIK, signalling changes to how zero‑emission cars are taxed within company car arrangements. Employers and drivers should review pay arrangements and total cost of employment to understand the net impact.

Broader tax context

Separately, the Tax Foundation notes state tax changes taking effect on 1 January 2026: the top marginal rate will be reduced from 5.9% to 5.65% in 2026, with a further reduction to 5.4% planned for 2027. While this relates to broader tax policy rather than vehicle‑specific charges, changes to marginal tax rates can affect the overall financial position of individuals facing higher vehicle taxes or altered company car taxation.

Conclusion and outlook

Car tax changes 2026 combine targeted VED increases for specific models with a one percentage point rise in company car BIK rates from April. Buyers, company car users and fleet managers should calculate the combined effect on purchase and running costs and consult payroll or tax advisers where necessary. With additional state tax adjustments scheduled at the start of 2026, motorists should monitor announcements and update budgeting plans accordingly.