Chancellor John Healey delivered his first Budget on Wednesday 28 October. For drivers and fleets, the headlines are a longer fuel duty cut and permanently higher tax-free mileage rates. Company car tax and the plans for electric car road tax stay as they were.
Here’s what changes, who it affects and when.
Fuel
The 5p-a-litre fuel duty cut has been extended by six months, to the end of June 2027. It was due to start unwinding from 1 January 2027. Duty on petrol and diesel stays at 52.95p a litre until then, and the lower rate for red diesel is extended to the same date.
From 1 July 2027 the cut ends and the delayed inflation rise kicks in, taking duty to 60.59p a litre. That’s 7.64p more, or around 9p a litre at the pump once VAT is added. It affects every petrol and diesel driver, private and business.
Mileage allowances
The tax-free mileage rate of 55p a mile for the first 10,000 business miles is now permanent. It was raised from 45p in May, backdated to April 2026, as a temporary measure. The rate for miles over 10,000 also rises, from 25p to 35p a mile, from April 2027.
This applies to employees using their own car for work and to self-employed people using simplified expenses. The government says around 3 million people benefit, with up to £300 a year more tax relief for someone driving 15,000 business miles. It doesn’t change the advisory fuel rates for company car drivers.
Tax on cars (VED)
No big changes. The Budget rates tables confirm the usual inflation rise from 1 April 2027:
- The standard annual rate goes from £200 to £210.
- The first-year rate for zero-emission cars stays at £10.
- The expensive car supplement still applies to petrol and diesel cars with a list price over £40,000, and to electric cars over £50,000. The higher EV threshold was announced last year and applies from April 2026.
Insurance premium tax stays at 12%.
Company cars & salary sacrifice
Company car tax rates are confirmed as previously announced. Electric cars pay benefit-in-kind (BiK) tax on 4% of their list price this year, rising to 5% from April 2027, 7% in 2028-29 and 9% in 2029-30.
Plug-in hybrids face the bigger change. From April 2028 the bands based on electric range go, and every car emitting 1 to 50g/km of CO2 pays 18%, then 19% in 2029-30.
The Budget did not set an electric car rate beyond April 2030, so fleets still lack long-term certainty. We haven’t seen any change to the rules on salary sacrifice for electric cars, so those schemes carry on as now.
EVs & charging
- Pay-per-mile (eVED): nothing new today. The charge confirmed earlier, 3p a mile for electric cars and 1.5p for plug-in hybrids, is still due from April 2028.
- Public charging: VAT on public chargers stays at 20%. The Treasury says it will cut prices at local, lower-powered public chargers, saving drivers who rely on them around £150 a year. Details are still to come.
- Home charging: the 0% VAT rate on household electricity, which started on 1 October, is extended to July 2027. That keeps charging at home cheaper over the winter.
Vans & business
- Capital allowances: the main-rate first-year allowance rises from 40% to 50%, and the main writing-down allowance falls from 14% to 12%. Full expensing stays for companies. Vans usually qualify for these allowances, but cars generally don’t. Your accountant can confirm exactly when the new rates apply to you.
- Van road tax: the standard rate for most vans rises from £360 to £375 from April 2027.
- Private hire: larger private hire operators will have to account for VAT on the full passenger fare. Smaller local taxi and minicab firms are protected.
The MPH view
This Budget doesn’t change the maths for company cars. Electric cars remain by far the most tax-efficient choice, at 5% to 9% BiK up to 2030, against 18% or more for plug-in hybrids from April 2028. If you run petrol or diesel vehicles, budget for around 9p a litre more at the pump from July 2027. If your team uses their own cars, check your mileage policy reflects the 55p rate and the new 35p rate over 10,000 miles.
To talk through what the Budget means for your next car, van or fleet, call us on 01242 500 007.