Rachel Reeves Announces Car Tax Changes from April 1 2026
In the 2025 Autumn Budget and subsequent Finance Bill, UK Chancellor Rachel Reeves announced one of the most significant overhauls to motor taxation in more than a decade. The changes, coming into force on 1 April 2026, include increased Vehicle Excise Duty (VED) charges across the board — with petrol and diesel cars facing higher annual costs — and broader shifts in how vehicles are taxed.
Why the Change?
Reeves and the Treasury argue the reforms are needed to adapt to evolving vehicle ownership patterns and to support the transition to low-emission motoring, while ensuring the Treasury continues to raise sufficient revenue for road maintenance and public services. Petrol and diesel drivers continue to pay fuel duty — which generates significant annual revenue — but restructuring VED reflects wider fiscal pressures and emissions goals.
What’s Changing for Petrol and Diesel Cars in April 2026?
1. Higher Vehicle Excise Duty (VED)
From 1 April 2026, VED rates for petrol and diesel cars will increase in line with inflation and reflect a new banding structure that heavily penalises high-emission vehicles. Under the updated system:
Cars with higher CO₂ emissions now attract much steeper first-year and ongoing annual taxes than before.
For vehicles emitting in the top band (over 255 g/km), first-year road tax can be thousands of pounds — for some models up to nearly £5,490 before additional supplements.
This is part of a broader shift introduced in 2025 and carried forward into 2026, where the standard annual rate (for most cars post-2017, including petrol/diesel) is around £195–£200, rising each year with inflation.
2. Luxury/Expensive Car Supplement Thresholds
A separate surcharge — the “Expensive Car Supplement” — applies to vehicles costing over a certain new-car list price. For electric cars, this threshold rises to £50,000 from 2026, but petrol and diesel cars remain at the £40,000threshold. Owners of qualifying vehicles must pay an extra £425 annually for up to five years.
3. Inflation-Linked Increases Across All Bands
All VED bands are linked to the Retail Price Index (RPI) and will therefore continue increasing year-on-year unless altered again by future budgets. This affects everyday tax bills for most drivers, particularly those with older or higher-emitting cars.
Broader Context: Electric and Hybrid Vehicles
While the headline focus here is petrol and diesel, a parallel suite of reforms affects electric vehicles (EVs) and plug-in hybrids:
From April 2028, a new pay-per-mile tax (often called Electric Vehicle Excise Duty or eVED) will apply, charging 3 pence per mile for EVs and 1.5 pence per mile for plug-in hybrids.
EVs and plug-in hybrids will also continue to pay standard VED and, if expensive enough, the Expensive Car Supplement.
These changes aim to offset the long-term loss of fuel duty as more drivers switch away from petrol and diesel.
Political and Public Reaction
The tax changes have drawn sharp criticism from motorists, industry groups and some MPs:
Many drivers warn the cost increases are significant, particularly for families and rural motorists, where alternatives to car travel are limited.
Critics argue that higher taxes on both traditional and electric vehicles could dampen consumer demand at a time when the UK still faces challenges ramping up EV infrastructure and availability.
Some industry voices contend that while incentives to reduce emissions are welcome, the scale and timing of tax increases risk penalising average motorists.
Supporters of the reform say it modernises the tax system, making it fairer by aligning charges with emissions and usage, and helps fund infrastructure like roads and charging networks. Election timing and broader fiscal pressures also frame political debate around these changes.
What Drivers Should Do Before April 1 2026
If you own or are considering purchasing a petrol or diesel car:
Check your vehicle’s CO₂ emissions and VED band — higher-emitting vehicles face the biggest increases.
Review the Expensive Car Supplement implications if your new or used car’s list price exceeds £40,000.
Plan for annual cost rises due to inflation-linked indexing of VED.
If you’re considering switching to an EV, factor in future mileage tax costs and infrastructure considerations.
Final Thoughts
Rachel Reeves’ car tax reforms from April 2026 mark a major shift in UK motoring taxation, reshaping the costs of both petrol/diesel and low-emission vehicles. While meant to future-proof government revenues and support climate goals, the changes have sparked controversy over affordability and fairness. Motorists, businesses and fleets will need to adapt to a landscape where both emissions and mileage increasingly determine how much drivers pay to keep vehicles on the road.
Car Tax Changes from April 1 2026
Rachel Reeves Announces Car Tax Changes from April 1 2026
In the 2025 Autumn Budget and subsequent Finance Bill, UK Chancellor Rachel Reeves announced one of the most significant overhauls to motor taxation in more than a decade. The changes, coming into force on 1 April 2026, include increased Vehicle Excise Duty (VED) charges across the board — with petrol and diesel cars facing higher annual costs — and broader shifts in how vehicles are taxed.
Why the Change?
Reeves and the Treasury argue the reforms are needed to adapt to evolving vehicle ownership patterns and to support the transition to low-emission motoring, while ensuring the Treasury continues to raise sufficient revenue for road maintenance and public services. Petrol and diesel drivers continue to pay fuel duty — which generates significant annual revenue — but restructuring VED reflects wider fiscal pressures and emissions goals.
What’s Changing for Petrol and Diesel Cars in April 2026?
1. Higher Vehicle Excise Duty (VED)
From 1 April 2026, VED rates for petrol and diesel cars will increase in line with inflation and reflect a new banding structure that heavily penalises high-emission vehicles. Under the updated system:
Cars with higher CO₂ emissions now attract much steeper first-year and ongoing annual taxes than before.
For vehicles emitting in the top band (over 255 g/km), first-year road tax can be thousands of pounds — for some models up to nearly £5,490 before additional supplements.
This is part of a broader shift introduced in 2025 and carried forward into 2026, where the standard annual rate (for most cars post-2017, including petrol/diesel) is around £195–£200, rising each year with inflation.
2. Luxury/Expensive Car Supplement Thresholds
A separate surcharge — the “Expensive Car Supplement” — applies to vehicles costing over a certain new-car list price. For electric cars, this threshold rises to £50,000 from 2026, but petrol and diesel cars remain at the £40,000threshold. Owners of qualifying vehicles must pay an extra £425 annually for up to five years.
3. Inflation-Linked Increases Across All Bands
All VED bands are linked to the Retail Price Index (RPI) and will therefore continue increasing year-on-year unless altered again by future budgets. This affects everyday tax bills for most drivers, particularly those with older or higher-emitting cars.
Broader Context: Electric and Hybrid Vehicles
While the headline focus here is petrol and diesel, a parallel suite of reforms affects electric vehicles (EVs) and plug-in hybrids:
From April 2028, a new pay-per-mile tax (often called Electric Vehicle Excise Duty or eVED) will apply, charging 3 pence per mile for EVs and 1.5 pence per mile for plug-in hybrids.
EVs and plug-in hybrids will also continue to pay standard VED and, if expensive enough, the Expensive Car Supplement.
These changes aim to offset the long-term loss of fuel duty as more drivers switch away from petrol and diesel.
Political and Public Reaction
The tax changes have drawn sharp criticism from motorists, industry groups and some MPs:
Many drivers warn the cost increases are significant, particularly for families and rural motorists, where alternatives to car travel are limited.
Critics argue that higher taxes on both traditional and electric vehicles could dampen consumer demand at a time when the UK still faces challenges ramping up EV infrastructure and availability.
Some industry voices contend that while incentives to reduce emissions are welcome, the scale and timing of tax increases risk penalising average motorists.
Supporters of the reform say it modernises the tax system, making it fairer by aligning charges with emissions and usage, and helps fund infrastructure like roads and charging networks. Election timing and broader fiscal pressures also frame political debate around these changes.
What Drivers Should Do Before April 1 2026
If you own or are considering purchasing a petrol or diesel car:
Check your vehicle’s CO₂ emissions and VED band — higher-emitting vehicles face the biggest increases.
Review the Expensive Car Supplement implications if your new or used car’s list price exceeds £40,000.
Plan for annual cost rises due to inflation-linked indexing of VED.
If you’re considering switching to an EV, factor in future mileage tax costs and infrastructure considerations.
Final Thoughts
Rachel Reeves’ car tax reforms from April 2026 mark a major shift in UK motoring taxation, reshaping the costs of both petrol/diesel and low-emission vehicles. While meant to future-proof government revenues and support climate goals, the changes have sparked controversy over affordability and fairness. Motorists, businesses and fleets will need to adapt to a landscape where both emissions and mileage increasingly determine how much drivers pay to keep vehicles on the road.
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