As the calendar flips to 2026, UK drivers and business owners are facing a raft of changes to the way car and van taxes are calculated and collected—a shift that could mean higher bills and tough decisions for many. While the New Year often brings resolutions and fresh beginnings, for motorists, it’s bringing a complex set of new rules, thresholds, and classifications that will affect everything from family hatchbacks to company pick-up trucks.
Car tax—sometimes called Vehicle Excise Duty—remains a staple of British motoring life. According to the Driver and Vehicle Licensing Agency (DVLA), it’s a charge that must be paid on any car registered in the UK that’s driven or kept on a public road. If your car sits unused on private property, you’re off the hook, but for everyone else, car tax is non-negotiable. The system, while familiar, is about to get more complicated with changes coming into force in 2026, and drivers are being urged to pay close attention.
First, let’s talk about the basics. Car tax can be paid in a way that suits most people’s budgets: annually, every six months, or monthly (with payments due on the first of each month). The DVLA recommends setting up a Direct Debit to avoid missing a payment—a simple step that can save a lot of hassle down the road. You can set up your Direct Debit online when you tax your vehicle or even at a Post Office, making it as painless as possible. Miss a payment, though, and you could find yourself facing fines or worse.
But how much you pay isn’t just about when you pay—it’s about what you drive. As reported by the DVLA on December 30, 2025, car tax bands are determined by several factors: the car’s registration date, the type of fuel it uses (petrol, diesel, electric, or hybrid), its CO2 emissions, and the vehicle’s list price. If you’re registering a new car, you’ll need to pay for the first 12 months up front, with the amount based on the car’s emissions and fuel type. The only time you’re legally allowed to drive a car without tax is when you’re taking it to a pre-booked MOT test.
One of the headline changes for 2026 is the adjustment to the so-called luxury car tax. Previously, if your car had a list price over £40,000, you’d face an extra charge—an attempt by the government to target higher-end vehicles. But from April 1, 2026, the threshold for electric vehicles will rise to £50,000. This is a significant move, designed to encourage the uptake of electric vehicles by making them more attractive to buyers of premium models. For petrol and diesel cars, however, the £40,000 threshold remains, so buyers of high-end fossil-fuelled cars won’t catch a break.
These changes aren’t happening in a vacuum. Businesses, especially small ones, are being hit by another tweak to the tax code—this time involving company vans. In her 2024 budget, Chancellor Rachel Reeves made a change that, according to The Times, could double the tax bills for some businesses. The crux of the matter? The definition of what counts as a van for tax purposes.
Previously, double-cab pick-up trucks—those with an extra row of seats and room for four or five people—were treated as vans for tax purposes. This was a boon for small businesses, tradespeople, and anyone who needed a practical vehicle for both work and family life. But under the new rules, any double-cab pick-up truck registered after April 2025 will be classified as a car instead of a van. This seemingly minor reclassification has major tax implications.
Here’s why it matters: company vans used for private purposes (like popping to the shops after a job) incur a flat-rate benefit-in-kind tax charge of £4,020, plus £769 if the employer also provides fuel. For a basic-rate taxpayer, that means £804 a year in tax; for a higher-rate payer, it’s £1,608. But if the vehicle is now considered a car, the benefit-in-kind tax is based on the vehicle’s value and emissions—a calculation that can easily double the tax bill for employees.
Simon Down, a consultant at Deloitte, put it plainly: “Taking these vehicles under the revised tax treatment will lead to significant cost increases. Companies and their employees have been looking to alternative vehicles to avoid significant cost increases or considering whether these vehicles are necessary.” It’s a sentiment echoed by many in the business community, especially those running small operations where every pound counts.
Matt de Prez, editor of Fleet News, added another perspective: the changes are having a big impact on pick-up trucks and might push employers towards electric vehicles. “An electric vehicle is exempt from the benefit-in-kind tax. Small businesses such as a small plumbing company will be affected more by the changes. The drivers will have vans as company cars and will use them for personal use too.” It’s a stark choice: pay more, or go green.
The government’s aim is clear. By raising the luxury car tax threshold for electric vehicles and making company car tax less attractive for fossil-fuelled vehicles, they’re nudging drivers and businesses towards greener options. But for many, especially those who rely on versatile pick-ups for both work and personal life, the changes feel like a double whammy. Not only are they facing higher bills, but they’re also being forced to reconsider what kind of vehicle makes sense for their needs.
For individuals, the message is simple: check your car’s registration, fuel type, and emissions, and use the GOV.UK vehicle status checker to see exactly what you’ll owe. For businesses, especially small ones, it’s time to crunch the numbers and weigh up whether it’s worth sticking with a pick-up or making the leap to electric. And for everyone, the only time you can drive without car tax is if you’re heading to a pre-booked MOT—so don’t try to skirt the rules.
HM Revenue & Customs (HMRC) hasn’t released figures on how many more vehicles are now incurring these benefit-in-kind charges, and they’ve pointed out that the changes are a matter for The Treasury. As of now, the business community is still waiting for further clarification or potential relief, but with the rules set to kick in soon, most are preparing for higher costs.
One thing’s for sure: 2026 will be a year of adjustment for UK drivers and businesses alike. Whether these changes will accelerate the switch to electric, squeeze small businesses, or simply lead to more confusion remains to be seen. But with the rules now set, it’s time for everyone behind the wheel to pay attention—or risk paying a lot more.