New little-known car tax rules could be costing UK drivers more

The updated VAT road fuel scale charges applies from May 1 2026, and drivers using company cars for personal journeys now have to apply the new rates when calculating VAT.

Instead of tracking mileage, a fixed charge applied based on:

• The car’s CO₂ emissions
• The VAT accounting period

Monthly costs range from £54 for low-emission cars up to £190 for higher-emission vehicles, with annual charges approaching £2,300.

A busy year for drivers

The VAT change lands during what has been described as a major year of reform for motorists, with research from Carwow highlighting a wave of new rules, rising costs and tighter enforcement.

Digital driving licences rollout

Driving licences began shifting toward a digital format in 2026, with full rollout expected by 2027. Physical licences remained valid, but drivers were urged to keep their details updated online to avoid issues.

Increased enforcement on the roads

Police and authorities expanded the use of automatic number plate recognition cameras to detect:

• Untaxed vehicles
• Cars without a valid MOT

This shift meant drivers faced a higher risk of penalties if paperwork was not up to date.

Electric car tax changes

Electric vehicles were no longer fully tax-free. From April 2025, standard road tax applied from the second year of ownership.

From April 2026, the expensive car supplement threshold increased from £40,000 to £50,000 for zero-emission vehicles, reducing the number of EV drivers affected by the extra charge.

Fuel duty changes looming

Further cost increases are expected later in the year:

Fuel duty is set to rise from September 2026, ending the long-standing 5p cut

• Company car tax for electric vehicles increased from 3% to 4% from April 2026
• High-emission vehicles faced rates of up to 37%

Motability scheme updates

Changes to the Motability scheme included:

• Removal of some luxury vehicles
• Higher VAT and insurance costs on Advance Payment vehicles from July 2026
• Continued exemptions for wheelchair accessible vehicles

London driving costs increased

The Transport for London Congestion Charge rose on 2 January 2026:

• Standard daily charge increased to £18
• Late payment rose to £21
• EV discounts were reduced to 25%

Polling suggested many drivers began avoiding certain routes due to rising charges.

From November 2026, all new vehicles were required to meet Euro 7 emissions standards, tightening limits on pollution.

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Siobhan Doyle, Consumer Writer at Carwow, said: “2026 is a big year for drivers because so many changes touch everyday life, from what you pay to how closely rules are enforced.

“Some updates are already in place, like the Congestion Charge increase in London, while others land later in the year. There are also road safety measures being discussed, but drivers should treat those as proposals until anything is confirmed.

“The simplest way to stay on the right side of the rules is to keep the basics watertight. Make sure your licence details are up to date and set reminders for your MOT, tax and insurance, because enforcement is becoming more automated and it’s easier than ever to get caught out.”

Learner driver rule changes and theory test updates

New rules required learners to give at least 10 working days’ notice to cancel or reschedule a driving test. Instructors also lost the ability to book tests on behalf of learners, part of efforts to improve fairness and data security.

Learner drivers also faced updated theory tests, including questions on:

• CPR
• Using a defibrillator

There are also consultations this year on potential new rules, including:

• Tougher drink-driving limits
• Eyesight tests for drivers over 70
• Stricter penalties for offences like not wearing a seatbelt

These proposals are not yet law but signalled possible future changes.