What The Budget Changed For Drivers And Businesses: Fuel Duty, Mileage Rates, eVED And Company Car Tax

Chancellor John Healey delivered his first Budget on 28 October 2026. For drivers and businesses, fuel duty stays frozen until 1 July 2027, the higher tax-free mileage rate is now permanent and the rate above 10,000 miles rises, and the 0% VAT on home electricity runs for three more months. The pay-per-mile charge on electric cars, eVED, is confirmed for April 2028 at the rates already proposed, and company car tax is now set out to 2030/31. Here is what changed, what did not, and when each change takes effect.

The changes at a glance

"Announced" means the government has set out the decision but Parliament has not yet passed it. Rates and dates can still change before the legislation is final.

Fuel duty: frozen to July 2027, then a step up

Without this Budget, the 5p cut would have ended and duty would have risen from January 2027. Instead, the government has cancelled that increase and extended the cut for six months. Petrol and diesel duty stays at 52.95p a litre until 30 June 2027. On 1 July 2027, the 5p comes back and the rate rises with RPI inflation in one step, to 60.59p a litre, according to HMRC's published rates. That is 7.64p a litre more, before VAT.

For a high-mileage petrol or diesel company car, that July 2027 step is the date to plan around. For anyone choosing a new car now, it is another reason to compare running costs over the full agreement, not just the next few months.

Mileage rates: 55p is permanent, and 35p above 10,000 miles

If you use your own car or van for work, the tax-free mileage rate is now 55p a mile for the first 10,000 business miles, permanently, not just for 2026/27. From 6 April 2027 the rate for business miles above 10,000 rises from 25p to 35p. The same rates apply to the simplified mileage rates for the self-employed, and the National Insurance disregard follows the higher-mileage change.

For directors and employees choosing between a company car, a car allowance and using their own car, this changes the comparison, especially for high business mileage. It is worth rerunning the numbers on the new rates.

Electric cars: home charging, public charging and eVED

• Home electricity: the 0% VAT rate on household electricity in Great Britain now runs until 30 June 2027, three months longer than planned, and VAT returns to 5% from 1 July 2027 unless it is extended again. The government expects the extension to apply UK-wide from April 2027, which would bring in Northern Ireland. Read what 0% VAT means for charging at home.
• Public charging: VAT on public and workplace charge points stays at 20%, and new legislation makes that explicit from 1 November 2026. Separately, the government has published the independent review of public charging costs, set up a taskforce to explore letting drivers use their home electricity tariff at local, lower-powered public chargers, and announced £100 million over two years to cut the cost of those chargers from spring 2027.
• eVED: the pay-per-mile charge goes ahead from 1 April 2028 at 3p a mile for fully electric and hydrogen cars and 1.5p for plug-in hybrids, on top of vehicle tax. It will be legislated in Finance Bill 2026-27, so it is confirmed policy but not yet law. New at this Budget: a mileage estimation tool at launch, an opt-in "eVED Connect" system that uses the car's own connectivity so drivers do not have to report mileage by hand, and an automated refunds system by 2030, for example where mileage was overestimated or the car was sold. At 10,000 miles a year, an electric car would pay £300. Read how eVED works on a lease.

Company car tax: set out to 2031

The rates already legislated to 2029/30 are unchanged. The Budget adds 2030/31, with every band 1 percentage point higher and the maximum rising to 40%.

The gap between electric and plug-in hybrid from April 2028 is unchanged: 7% against 18% in 2028/29, and 10% against 20% in 2030/31. Our company car tax guide has every band, and the company car tax calculator works out your own figure.

Two further changes for employers. From 6 April 2027, company cars, vans and fuel benefits must be reported and taxed through payroll in real time, so payroll software and processes need to be ready by then. And the van benefit charge and car and van fuel benefit charges rise with CPI from 6 April 2027, with the car fuel benefit multiplier set at £4,310 for 2027/28.

What did not change

• Company car tax rates to 2029/30.
• The eVED rates and start date already proposed in July.
• The Expensive Car Supplement thresholds: £40,000 list price for petrol, diesel and hybrid cars, £50,000 for electric cars. The supplement itself is £440 a year in 2026/27 and, like other vehicle tax rates, rises with RPI from 1 April 2027. Read how the threshold works.
• The Budget document does not change the Electric Car Grant. The government says it will publish its response to the zero-emission vehicle sales target review by the end of 2026, with any changes from 2027.

What it means for your next lease

• Company car drivers: an electric car is taxed at 5% in 2027/28 and 10% by 2030/31, against 20% for most plug-in hybrids from 2030/31 and up to 40% for petrol and diesel. A three or four-year agreement signed now runs well into those years, so compare on the rates for the years you will drive the car.
• SME directors and finance leads: Class 1A National Insurance follows the same percentages, so the electric advantage holds for the business too. Plan for payrolling company car benefits from April 2027. If you buy cars outright, the main rate writing-down allowance falls to 12% from April 2027; contract hire rentals are a running cost and are not claimed through capital allowances.
• High-mileage petrol and diesel drivers: fuel duty is fixed until 30 June 2027, then rises by 7.64p a litre before VAT. If your next car is due around then, factor it in.
• Electric car drivers: eVED is coming in April 2028 and is now confirmed policy. Agree a realistic mileage allowance, and ask before you sign whether the rental can change if new vehicle taxes are introduced and how eVED will be recovered.
• Directors using their own car: rerun the comparison with a company car or car allowance at 55p and 35p a mile.

If you would like the numbers run for your own cars, mileage and tax rate, talk to our team on 01752 429950 or send an enquiry. You can also browse business car leasing, business contract hire and electric car leasing, or read what we said was settled before the Budget.

Sources: HM Treasury, Budget 2026, 28 October 2026; HMRC and HM Treasury, Budget 2026: Overview of tax legislation and rates and Annex A, 28 October 2026; HMRC, Electric Vehicle Excise Duty (eVED) policy paper, 13 July 2026; Department for Transport, HM Treasury and DESNZ, Cost of public electric vehicle charging review, 28 October 2026. Measures marked as announced are not yet law and may change before they are legislated. Mileage figures are illustrative. This is general information, not tax advice.

Intelligent Vehicle Finance is a credit broker, not a lender, and receives a commission from the lender or funder when an agreement completes. A trading style of XLCR Vehicle Management Ltd, authorised and regulated by the Financial Conduct Authority (FRN 315268). Subject to status and availability.

By the Intelligent Vehicle Finance editorial team. Last updated: October 2026.