The Budget on 28 October 2026 had several measures for businesses that run cars and vans or pay staff to drive their own. Mileage rates are going up again and company car tax is now set out to 2030/31. Most of the changes take effect in April 2027, which gives employers time to update policies and payroll.

This guide covers the Budget 2026 changes that matter for company cars, business mileage and fleet costs, and what to do about each.

Mileage rates: 55p is here to stay, and higher mileage gets a rise

Approved mileage allowance payments (AMAPs) are the most an employer can pay tax-free when an employee uses their own car or van for business journeys. The rate for the first 10,000 business miles a year went up from 45p to 55p from 6 April 2026 (GOV.UK, increasing mileage rates). The government has now said the 55p rate will stay, and that the rate for business miles above 10,000 a year is expected to rise from 25p to 35p from 6 April 2027 (CIPP, 27 October 2026). The 55p rate also applies to self-employed people who use the simplified mileage method.

Someone doing 15,000 business miles a year could be paid up to £5,750 tax-free in 2025/26. That rises to £6,750 in 2026/27 and, once the 35p rate applies, £7,250 in 2027/28.

You don't have to pay the full rate. If you pay less, employees can claim tax relief on the difference from HMRC (MoneySavingExpert, 26 October 2026). Either way, check your expenses policy and payroll settings before April 2027, especially if you have staff who regularly pass 10,000 business miles.

Higher rates also make staff in their own cars more expensive to reimburse. If a lot of your business travel happens in employees' own cars, now is a good time to look at the whole picture, including insurance and vehicle checks. The guide to grey fleet responsibilities from AMT Insurance Solutions covers what employers need to check.

Company car tax: rates now set to 2030/31

Company car tax (benefit in kind) is charged on a percentage of the car's list price, set by its CO2 emissions. The Budget confirmed the rates for 2030/31, with a one percentage point rise across the bands. For a zero emission car the rate goes from 4% in 2026/27 to 5% in 2027/28, 7% in 2028/29, 9% in 2029/30 and 10% in 2030/31. The top rate rises to 40% in 2030/31 (GOV.UK, Budget 2026 Annex A; Business Motoring, 28 October 2026).

For a £40,000 electric company car in 2030/31, the taxable benefit would be £4,000. A higher-rate taxpayer would pay £1,600 a year in tax on it, and the employer would pay Class 1A National Insurance of £600 at the current 15% rate. On a petrol car of the same price taxed at the 40% top rate, the taxable benefit would be £16,000.

Knowing the rates five years out helps when you choose cars on a three or four-year lease. Our Lease team's guide to electric company car tax explains the calculation, and switching your fleet to electric covers how to plan the move.

What about salary sacrifice?

The Budget didn't change how electric car salary sacrifice is taxed. The car is taxed at the same benefit in kind rates as a company car, so the car's benefit in kind rises to 10% in 2030/31 for new and existing arrangements alike. Our post on EV salary sacrifice for employers looks at the costs and savings.

Fuel duty: the 5p cut runs to June 2027

The 5p a litre cut in fuel duty has been extended, keeping the main rate for petrol and diesel at 52.95p a litre until 30 June 2027. The Budget documents show it rising to 60.59p a litre from 1 July 2027 (GOV.UK, Budget 2026 Annex A). If you set fuel budgets for vans or fuel cards, plan for that step up in the second half of 2027.

Vehicle tax (VED) from April 2027

From 1 April 2027 the standard rate of vehicle tax for cars registered since April 2017 will be £210 a year. Zero emission cars pay £10 in their first year. The Expensive Car Supplement adds £440 a year in years two to six for petrol and diesel cars with a list price over £40,000, and for zero emission cars over £50,000 (GOV.UK, Budget 2026 Annex A). Setting list price limits in your car policy is the simplest way to avoid paying the supplement without meaning to.

Pay-per-mile tax on electric cars: no change

The Budget didn't change electric vehicle excise duty (eVED). It is still due from April 2028 at 3p a mile for electric cars and 1.5p for plug-in hybrids, alongside vehicle tax (HMRC, eVED policy paper). Our post on what eVED means for business cars and fleets explains how it will work for company and leased cars.

Payrolling company car benefits from April 2027

This one wasn't new in the Budget, but it is the change with the nearest deadline. From 6 April 2027 employers must report and tax company car, van and fuel benefits through payroll instead of on P11D forms. Most other benefits follow from April 2028 (BVRLA, 23 June 2026). Talk to your payroll provider now about the data they will need for each car, such as list price, CO2 and any employee contributions.

What should businesses do now?

• Review your mileage rates and expenses policy before 6 April 2027, particularly for staff above 10,000 business miles.
• Get company car data ready for payrolling benefits from April 2027.
• Check new car choices against the benefit in kind rates to 2030/31 and the £50,000 Expensive Car Supplement threshold for electric cars.
• Budget for higher fuel duty from July 2027 if you run petrol or diesel vans or cars.
• Look at your highest-mileage drivers when you plan for eVED from April 2028.

Cars and vans for your business

AMT works with businesses on business car leasing and van leasing, and our car hire team covers short and longer-term needs. If you're reviewing your fleet after the Budget, we're happy to talk it through.

This article is general information, not tax advice. Your accountant can confirm how the rules apply to your business. Figures checked on 29 October 2026: GOV.UK Budget 2026 overview of tax legislation and rates, Annex A (28 October 2026); GOV.UK increasing mileage rates (June 2026); CIPP and MoneySavingExpert on the HM Treasury mileage announcement (26–27 October 2026); Business Motoring (28 October 2026); HMRC eVED policy paper (13 July 2026); BVRLA on payrolling (23 June 2026). Some measures still need legislation.

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