New tax year 2026: what changed on 5th April and what it means for used car buyers

The new tax year started on 5 April 2026, and with it came a set of changes that directly affect the cost of buying, owning, and running a used car in the UK. Some of these are small adjustments. Others — particularly around electric vehicle taxation and the looming fuel duty rise — are meaningful enough to factor into a car buying decision right now. Here is a clear breakdown of everything that changed and what it means if you are in the market for a used car.

Road tax (VED) has gone up — and the EV rules have changed significantly

From 1 April 2026, Vehicle Excise Duty rates increased in line with RPI inflation. The standard annual rate for most cars first registered after April 2017 rose from £195 to £200 — a £5 increase per year. This applies equally to petrol, diesel, hybrid, and electric vehicles once they move past their first year of registration and onto the standard rate.

For most used car buyers, this is a modest change. The more significant shift for 2026 is around how electric vehicles specifically are taxed, and it works in two directions.

The first direction is a cost: this is the first full renewal cycle where electric vehicle owners are paying the standard VED rate of £200 per year. EVs joined the VED system from 1 April 2025, so new EV buyers registered from that date pay £10 in year one, then £200 annually thereafter. The idea that electric cars are exempt from road tax is no longer correct.

The second direction is a meaningful saving for used EV buyers: the threshold for the Expensive Car Supplement — sometimes called the luxury car tax — has risen from £40,000 to £50,000 for zero-emission vehicles from 1 April 2026. The supplement adds £440 per year on top of the standard rate for five years on cars whose original list price exceeded the threshold. For EVs, the new £50,000 threshold removes a significant portion of the used mid-range EV market from this additional charge.

To understand why this matters in practice: a used Tesla Model 3 Long Range, a Volkswagen ID.4, or a Kia EV6 with a list price between £40,000 and £50,000 that was registered before 1 April 2026 would previously have attracted the supplement. The same car registered from 1 April 2026 onwards does not. Over five years, that is £2,200 saved — purely from the threshold adjustment.

There is, however, an important caveat for used EV buyers. The new £50,000 threshold applies to zero-emission cars registered from 1 April 2026. A used EV registered before that date retains the £40,000 threshold. If you are considering a used EV with an original list price above £40,000 but below £50,000 that was registered before April 2026, check the V5C registration date and calculate whether the supplement still applies for the remaining years of the five-year window. This is a practical check worth doing before purchase.

For used cars registered between 1 March 2001 and 31 March 2017, VED is still calculated based on CO2 emissions bands rather than a flat rate. These bands have also been adjusted slightly upward for 2026/27. A car in Band B (101–110g/km CO2) pays £20 per year. Band D (121–130g/km) pays £170. The highest bands — Band L (226–255g/km) and Band M (over 255g/km) — pay £760 and £790 respectively. Efficient pre-2017 petrol cars remain among the cheapest cars to tax on the used market.

Your income is worth slightly less than last year

The personal income tax allowance remains frozen at £12,570 for 2026/27. It has been fixed at this level since 2021/22 and is due to remain there until at least 2031. The higher rate threshold is similarly frozen at £50,270.

With wages rising in nominal terms, more people are being pulled into higher tax bands through what economists call fiscal drag — the real-terms tax increase that happens when thresholds do not rise with earnings. If your salary has increased since 2021 but the amount you can earn before paying income tax has not moved, you are paying a higher effective rate of income tax than you were five years ago. The Institute for Fiscal Studies estimates that by 2027/28 this freeze will have pulled around 3.5 million additional people into the higher or additional rate bands compared to if thresholds had risen with inflation.

For used car buyers, the practical implication is straightforward: take-home pay growth is being partially absorbed by the frozen threshold, which affects how much is genuinely available for a monthly car finance payment. If you are using a finance eligibility checker or calculating what you can afford, working from your actual current take-home figure rather than gross salary gives a more accurate picture.

Fuel duty is being phased back up from September 2026

The 5 pence per litre fuel duty cut that has been in place since March 2022 is being extended until the end of August 2026, at which point it will begin a gradual phase-out. The rate will increase progressively between September 2026 and March 2027, returning to pre-March 2022 levels by the end of February 2027.

This means that anyone buying a petrol or diesel used car now will see pump prices rise from autumn 2026 onwards as the duty reversal feeds through. The reversal adds approximately 5 pence per litre to fuel duty alone, before the retailer margin. For a driver covering 10,000 miles per year in a car averaging 40 miles per gallon, that equates to roughly £57 per year in additional fuel costs from the duty change — not transformative, but a meaningful addition alongside the Middle East conflict impact on global oil prices that has already added 14 pence per litre to petrol prices since late February 2026.

For EV buyers, the fuel duty rise is irrelevant in terms of charging costs, but it does strengthen the running cost argument for switching to electric. The economics of EV versus petrol ownership are being pushed further apart by fuel cost increases, which is part of why used EV buyer demand has risen so sharply since the conflict began.

Company car drivers: electric vehicle BiK has risen to 4%

From 6 April 2026, the Benefit-in-Kind rate for electric company cars increased from 3% to 4%. Benefit-in-Kind tax is calculated as a percentage of the car’s official list price, applied to the employee’s income tax rate.

For a basic rate taxpayer driving a company EV with a list price of £35,000, the change from 3% to 4% means the taxable benefit increases from £1,050 to £1,400 per year, and the annual tax paid rises from £210 to £280 — an increase of £70 per year. For a higher rate taxpayer, the equivalent increase is £140 per year. The rate is confirmed to rise to 5% in 2027/28 and 6% in 2028/29.

Electric cars remain dramatically cheaper in BiK terms than equivalent petrol or diesel vehicles — a comparable petrol car at 120g/km CO2 would attract a 27% BiK rate, resulting in tax of roughly £3,780 per year for a basic rate taxpayer on the same £35,000 list price. The EV advantage is substantial and is not closing meaningfully for most drivers despite the annual incremental rises. However, for company car drivers who are weighing up a used EV purchase versus continuing in a combustion vehicle, factoring in the confirmed upward trajectory of EV BiK rates over the next three years is sensible financial planning.

Energy prices: what the new cap means for EV home charging costs

The energy price cap for the April to June 2026 quarter is set at the equivalent of £1,641 per year for a typical dual-fuel household paying by direct debit. This is one of several data points that affect the real-world running cost comparison between EVs and petrol cars.

Home charging typically costs around 7–10 pence per mile at the current electricity rates for a typical EV, compared to approximately 15–20 pence per mile for a petrol equivalent at current pump prices. The relative advantage of home charging has remained broadly consistent despite electricity price changes, but the Middle East conflict’s impact on oil prices has widened the gap further, making the case for used EVs stronger than it was at the start of 2026.

What this means when buying a used car at Carsa

The practical summary for used car buyers entering the market after 5 April 2026 is as follows. Road tax is marginally more expensive for almost all cars. Used EVs with original list prices between £40,000 and £50,000 registered from April 2026 avoid the Expensive Car Supplement — check the registration date and original list price before purchasing a used EV in this price bracket. Fuel costs for petrol and diesel cars are already elevated and will increase further from September 2026 as the fuel duty reversal begins. Income tax thresholds are still frozen, meaning take-home pay growth is partly absorbed by the tax system. And company car drivers face a confirmed upward trajectory in EV BiK rates, though EVs remain far more tax-efficient than petrol equivalents.

Carsa stocks a wide range of used cars across all fuel types, all priced on average £700 below market value. Every car comes with a 90-day warranty included and can be reserved online for collection at your nearest store. Finance from 10.9% APR representative. Carsa is a credit broker, not a lender.

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