A new excise duty on electric vehicles (EVs) from 2028, a further freeze on fuel duty until August 2026 and the annual increases in tobacco duty also featured on Budget day.
Fuel duty
The temporary 5p fuel duty cut has been extended for a further five months from 31 March 2026 to 31 August 2026. Thereafter, the cut is being reversed with three increases in stages as follows:
- 1p on 1 September 2026,
- 2p on 1 December 2026, and
- 2p on 1 March 2027.
The planned inflationary increase for 2026/27 will not take place. However fuel duty will begin to increase with inflation again in accordance with the Retail Prices Index (RPI) starting from April 2027.
EVs
From April 2028 a new EV excise duty (eVED), a new mileage charge for electric and plugin hybrid cars, will take effect. Drivers will pay for their mileage on a per-mile basis alongside their existing vehicle excise duty. EVs will pay half the equivalent fuel duty rate for petrol and diesel cars, and plug-in hybrid cars will pay a reduced rate equivalent to half of the electric car rate. This will be a self-reported per-mile levy.
Other electric vehicle types, such as vans, buses, motorcycles, coaches and HGVs, will be out of scope of the eVED when it is introduced as the transition to electric for these vehicle types is less advanced than for cars. At the same time, the Government also announced specific measures to help consumers choose EVs and to support effective and accessible charging infrastructure to support the transition to EVs.
A consultation was launched on Budget Day which provides further detail on how the eVED will work and which also seeks views on its implementation. The consultation will remain open until 18 March 2026.
According to the Budget Red Book, when the eVED takes effect, an average EV driver will pay around £240 per year or £20 per month.
Tobacco duty
Duty rates on all tobacco products increased by RPI inflation plus 2 percentage points from 6pm on 26 November 2025. A one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and the annual uprating of tobacco duty by RPI plus 2 percentage points next year will take effect from 1 October 2026.
Air passenger duty (APD) rates
All rates of APD will increase in line with the RPI from 1 April 2027 and will be rounded to the nearest penny. In last Autumn’s Budget the Government announced plans to extend the higher APD rate to private jets over 5.7 tonnes. A summary of consultation responses to the associated consultation has been published which confirms that this will be legislated in Finance Bill 2026 to take effect from 1 April 2027.
Alcohol duty
All alcohol duty rates will increase in line with RPI inflation from 1 February 2026. The small producer relief discounts will also increase from the same date.
Vaping duty
The previously announced vaping products duty will commence as planned from 1 October 2026 at a flat rate of £2.20 per 10ml. It will apply to all vaping liquid and will work alongside the vaping duty stamps scheme to drive compliance.
£10 million of funding has also been redirected from HMRC to the Border Force in 2026/27 with the aim of enhancing operational information gathering capabilities ahead of the introduction of this new duty and to support enforcement at the border.
Gambling duty
Following consultation, the Government has decided not to proceed with a single tax on remote betting and gaming. Instead, duties on remote gambling will be increased with different rates applying to remote betting and remote gaming.
Remote gaming duty will increase from 21 percent to 40 percent from 1 April 2026. A new remote betting rate will be introduced at 25 percent from 1 April 2027 as part of the general betting duty. This new rate will not apply to self-service betting terminals, spread betting, or pool betting. Remote bets on horseracing will be excluded from these changes and will remain taxed at 15 percent. Bingo duty will be abolished from 1 April 2026. Details of the changes are set out in a policy paper.
Gaming duty bands
The gross gaming yield bandings for gaming duty will be frozen from 1 April 2026 until 31 March 2027.
Duty free allowances
A duty free allowance of 50ml per passenger for vaping products will be introduced in October 2026, alongside moving cider and sparkling wine into the beer and still wine duty free categories, respectively.
Vehicle excise duty (VED)
Search and rescue vehicles will be exempt from VED; work will begin with stakeholders to design and implement this exemption from April 2027.
The VED rates for cars, vans, HGVs and motorcycles will increase in line with RPI inflation from 1 April 2026. The HGV levy will also increase in line with RPI inflation from the same date.
The VED expensive car supplement threshold will increase from £40,000 to £50,000 for zero-emission vehicles only. This change will take effect from 1 April 2026 and will apply to zero-emission EVs registered from 1 April 2025 onwards.
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