Budget 2026 extends 5p fuel duty cut and HGV road tax holiday to July 2027
Fleets running petrol and diesel vehicles keep the lower duty rate, and HGV operators keep the road tax holiday, until 1 July 2027. The October Budget also extends the electricity VAT cut that lowers home charging costs and makes higher tax-free mileage rates permanent for staff using their own vehicles. Fleet Alliance's analysis adds 2030/31 company car BiK rates and eVED per-mile charges from April 2028.
The Budget Report, laid before the House of Commons on 28 October 2026, extends the 5p fuel duty cut and freeze to 1 July 2027. It also maintains the HGV road tax holiday to the same date. Both remain temporary measures.
Treasury figures in the Budget show UK pump prices rose between February and October 2026, with petrol up 33% and diesel up 41%. The equivalent rises were 19% for petrol and 31% for diesel in Germany, and 30% and 42% in France. The UK average diesel pump price was 199.2p a litre in the week of 26 October 2026, according to government figures tracked by THRIVE.
Electricity VAT and home charging
The Budget also extends the VAT cut on electricity to July 2027. The Treasury expects this to take around £50 off the annual Ofgem price cap in April 2027.
Fleet Alliance's analysis of the Budget says VAT on qualifying domestic electricity in Great Britain fell from 5% to 0% on 1 October 2026, and that the extension will continue to reduce the cost of home charging. The Government expects the extended relief to apply in Northern Ireland from April 2027.
Mileage rates
The tax-free mileage rates for people who use their own vehicle for work are being increased permanently. According to Fleet Alliance, the rate for the first 10,000 business miles in a tax year rose from 45p to 55p per mile from 6 April 2026, and that increase is now permanent. The rate above 10,000 business miles will rise from 25p to 35p per mile from 6 April 2027. These are tax-free allowance rates rather than amounts employers are required to pay.
Company car tax and eVED
Fleet Alliance reports that the Budget confirmed company car benefit-in-kind rates for 2030/31. Every band rises by one percentage point on 2029/30, subject to a maximum of 40%, taking zero-emission cars from 9% to 10%. It also notes that mandatory payrolling of company car, van, fuel and medical benefits, announced previously, is due to take effect from 6 April 2027.
The Budget document describes Electric Vehicle Excise Duty (eVED) as a previous decision, taken to respond to the long-term decline in fuel duty receipts. According to Fleet Alliance, this Budget added further detail: from 1 April 2028 eVED will apply alongside standard VED, at 3p per mile for fully electric and hydrogen fuel-cell cars and 1.5p per mile for plug-in hybrid cars, with rates scheduled to rise in line with CPI from 2029/30. Fleet Alliance adds that the Government intends to introduce arrangements for leasing and rental businesses, including the ability to estimate mileage centrally, though the details are still being developed.
Public charging
Electricity supplied through public charge points remains subject to 20% VAT, Fleet Alliance notes. The Government is setting up a taskforce to explore whether drivers could use their domestic electricity tariff at local, lower-powered public charge points. It has also announced £100 million over two years to reduce the cost of that charging, with support expected to take effect from spring 2027.
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The numbers, 26 Oct: Diesel eases to 199.3p but remains 3.8p up on four weeks ago
EVA England calls for eVED delay to 2030 and EV benefit-in-kind rates to 2035 in Budget 2026 asks
The numbers, 19 Oct: Diesel reaches 200p a litre after a 9.3p rise in four weeks
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