Automotive and Transportation Archives

2026-27 VAT Fuel Scale Charges: Key Changes and What They Mean for Your Business

Posted on 5 May 20265 May 2026 by Farazia Gillani

From 1 May 2026, the UK VAT road fuel scale charges change to cover the period to 30 April 2027. These flat-rate charges apply when a business reclaims VAT on vehicle fuel but a car is used for private travel. In practice, instead of keeping detailed mileage logs, a fixed scale charge is added to the VAT return to account for the private fuel usage. The new charges (VAT-inclusive) are set by CO₂ emission band and by the length of the VAT accounting period (1, 3 or 12 months). Businesses must start using the updated scales in the first VAT period beginning on or after 1 May 2026.

What is a fuel scale charge?

A fuel scale charge is effectively a fixed amount of output VAT owed per car, depending on CO₂ emissions. For example, a car emitting 140 g/km CO₂ has a charge of £98 for a one-month period (or £1,182 for a 12-month period). These values include VAT, so the VAT element is already built into the published figures. Typical 2026/27 charges include:

CO₂ (g/km)	12-month charge (£)	3-month charge (£)	1-month charge (£)
120 or less	657.00	163.00	54.00
140	1,182.00	294.00	98.00
180	1,708.00	426.00	142.00
225 or more	2,297.00	574.00	190.00

Table: Example VAT fuel scale charges for 2026–27 (VAT inclusive).

Read: How Company Car Tax Bands Work and What You Will Pay

Key Changes for 2026–27 VAT Road Fuel Scale Charges

The 2026–27 rates are slightly lower than in 2025–26, following official adjustments. For instance, the top band (225+ g/km) charge fell from £2,314 to £2,297 per year, and the lowest band (≤120 g/km) fell from £661 to £657 per year. All businesses using the fuel scale must switch to these new figures for any VAT period starting 1 May 2026 or later. The published guidance makes clear that “the VAT road fuel scale charges are amended with effect from 1 May 2026” and must be used from that date onwards.

How to Calculate Your Fuel Scale Charge

Identify the car’s CO₂ emission band

Check the official CO₂ figure from the vehicle logbook, the DVLA database, or the manufacturer’s certificate. If the exact figure isn’t a multiple of 5 g, round it down to the nearest 5 (e.g. 143 g becomes 140 g). If the vehicle has more than one CO₂ figure (e.g. separate figures for petrol and hybrid modes), use the lowest or the combined rating as advised.

Special case – older cars:

Cars registered before 1997 may lack a CO₂ figure. In that case, use engine size to pick a band: up to 1,400 cc = 140 g/km band; 1,401–1,999 cc = 175 g/km band; 2,000 cc or more = 225 g/km band.

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Choose period and charge:

Determine your VAT accounting period (1, 3 or 12 months). Then look up the corresponding charge for your CO₂ band. For example, a car at 125 g/km is in the 125 band, giving a charge of £246 for 3 months or £81 for 1 month (see table above).

Pro-rate if needed:

If the vehicle was used privately for only part of the VAT period, pro‑rate the charge. Calculate the percentage of the period during which the car was used, and apply that to the scale charge. For example, if the accounting period is 12 months but the car was used only 6 months, a 50% adjustment applies. This approach is confirmed in the guidance: “record [the percentage] of the accounting period. Apply this percentage to each road fuel scale charge to get a total figure”.

Include on the VAT return

The fuel scale charge (which already contains VAT) is added to the VAT return as output tax owing on fuel. In other words, businesses reclaim input VAT on fuel normally, then add the flat scale charge to Box 1 of the VAT return for the period.

Also Read: VAT on Car Hire in the UK – What Businesses Need to Know

Applying the Scale Charge

One driver per car:

The scale charge is applied per person-car combination. Each employee or director using a company car privately incurs one charge for that vehicle. If more than one person uses the same car, each must be treated separately.

Multiple cars:

If an individual has multiple cars, apply the same steps to each vehicle. If two cars happen to fall in the same CO₂ band for the same person, HMRC notes they “should be treated as if they were one car” when calculating percentages. In practice, this rarely affects the outcome compared to treating them separately.

Record-keeping:

Keep records of how each charge was calculated (CO₂ figure sources, period length, and any percentage used). This protects you in case of a VAT inspection.

Electric/hybrid vehicles:

A fully electric car does not use VATable fuel, so the fuel scale does not apply. For plug-in hybrids or conventional hybrids, use the petrol/diesel CO₂ band as above.

How We Can Help You Deal with VAT on Automobiles

VAT Return Support: We help businesses apply the correct fuel scale charges on each VAT return. Our team will ensure the right CO₂ band and period are used, so the fuel VAT is calculated correctly.
Company Car and Expenses Advice: Our experts can advise on company car tax and benefit rules. We explain the fuel scale method and alternatives (like mileage logs) so you choose the best option.
Record-Keeping and Compliance: We can set up simple spreadsheets or software entries to track usage percentages and keep evidence of CO₂ figures. This ensures your accounting is robust for HMRC review.
Proactive Updates: Tax rules change frequently. We monitor official updates (such as the new 2026/27 rates) and notify our clients promptly. You can rely on Apex Accountants to keep you compliant without surprises.

Our dedicated advisers stay current with all HMRC rules and can guide you through the fuel scale process. If you provide cars or fuel to staff, our firm can take the stress out of calculating and reporting these VAT charges correctly.

For more details or personalised support, get in touch with the Apex Accountants team. We can help you implement the new VAT fuel scale charges smoothly and ensure your VAT returns are accurate.

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FAQs About Fuel Scale Charges in UK

Who must use fuel scale charges?

Any business that reclaims VAT on fuel for a car and allows private use must account for fuel. The fuel scale is a simple, blanket method, so many companies choose it instead of tracking actual miles. If no VAT was reclaimed on fuel, the scale charge is not needed.

What if fuel is paid by personal funds?

The scale charge only applies when the company reclaims fuel VAT. If an employee buys personal fuel with no VAT reclaimed, no output tax is due.

How to find a car’s CO₂ figure?

Check the car’s V5C logbook, or use the DVLA online vehicle checker or the manufacturer’s data. Use certificates if needed.

How Company Car Tax Bands Work and What You Will Pay

Posted on 17 April 202617 April 2026 by Rida Ahmed

In the UK, most company cars (and vans) used for private purposes fall under benefit-in-kind taxation. The value is calculated using the vehicle’s list price, while the applicable percentage is determined through tax bands for company cars, which are based on CO₂ emissions and the type of fuel used.

In practice, HMRC publishes percentage bands for each tax year – you multiply the car’s list price by the relevant percentage to get the taxable benefit. Low-emission vehicles attract much lower percentages, while high-emission cars top out at 37%. The taxable value is further reduced if the employee pays anything towards the cost, uses the car only part-time, or has a car has low CO₂ emissions.

How Compay Car Tax Bands Are Calculated

Benefit calculation

The BIK rate is a percentage of the car’s original list price (including VAT and options). HMRC sets the percentage in the CO₂ band. For example, a petrol/diesel car emitting 145 g/km might be taxed at 35% of its list price, whereas a new electric car is taxed at only a few percent.

Emission bands:

Cars are grouped by CO₂ emissions (g/km) and, for hybrids/plug-ins, by their electric-only range. Each band has a set percentage. Lower bands (cleaner cars) pay less tax. The table below summarises the 2025/26 and 2026/27 company car tax rates. (From April 6, 2026 new rates apply.)

CO₂ emissions (g/km) & electric range	2025/26 rate (%)	2026/27 rate (%)
Zero emission (fully electric)	3 %	4 %
1–50 (≥130 mile EV range)	3 %	4 %
1–50 (70–129 mile range)	6 %	7 %
1–50 (40–69 mile range)	9 %	10 %
1–50 (30–39 mile range)	13 %	14 %
1–50 (<30 mile range)	15 %	16 %
51–54	16 %	17 %
55–59	17 %	18 %
60–64	18 %	19 %
65–69	19 %	20 %
70–74	20 %	21 %
≥75 (all higher bands)	21 %–37 %	21 %–37 %

Table: Company car BIK rates for tax years 2025/26 and 2026/27 by CO₂ emissions and electric range.

Why Electric Cars Have the Lowest Tax Rates

Fully electric cars sit at the lowest end of the tax scale.

For the 2025/26 tax year, the rate is 3%. This increases slightly to 4% in 2026/27.

Plug-in hybrids with a long electric range (130+ miles) follow the same pattern. This makes them a strong option for reducing overall tax liability.

Also Read: VAT on Car Hire in the UK – What Businesses Need to Know

How Plug-in Hybrids and Mid-Range Cars Are Changing

Other plug-in hybrids are also seeing small increases. Each band rises by 1 percentage point depending on electric range.

For example:

70–129 miles range → slight increase
40–69 miles range → slight increase
Below 30 miles range → higher tax compared to longer-range models

Cars with moderate emissions (51–74 g/km) also move up by 1%.

A car emitting 65–69 g/km increases from 19% to 20%

Higher emissions continue to push vehicles into more expensive brackets.

When These Changes Came Into Effect

The updated rates apply from:

April 2025 (2025/26 tax year)
April 2026 (2026/27 tax year)

These changes form part of a gradual shift rather than a sudden increase.

What to Expect in the Coming Years

Tax rates for electric vehicles will rise slowly over time.

Planned increases include:

6% in 2027/28
8% in 2028/29
9% in 2029/30

Even with these changes, electric cars will remain the most tax-efficient option.

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The Highest Tax Rates for Petrol and Diesel Cars

Petrol and diesel vehicles continue to sit at the top end of the tax scale.

The maximum rate remains at 37%
This applies once emissions go above 160 g/km

In simple terms, the higher the emissions, the higher the tax.

How it works

The employee’s taxable benefit is calculated by:

This is the car’s list price, which includes any accessories and VAT.
Applying the appropriate percentage from the table above.
Multiplying by the employee’s income tax rate (e.g., 20% or 40%) to find the tax due.

Example: A £30,000 car with 0 g/km CO₂ (electric) has a 3% BIK in 2025/26. The taxable benefit is 3% of £30,000 = £900. A 20% taxpayer would pay £180 in tax (20% of £900).

Special cases:

If you pay something towards the car’s cost (e.g., contribute to the lease or petrol), such payment reduces the taxable value.
Part-time availability (less than 15 hours/week) also reduces the taxable benefit.
Employer-provided fuel for private use is a separate charge: free petrol/diesel triggers a fuel benefit (using a fixed multiplier × BIK%). For 2026/27 the fuel multiplier is £29,200 (up from £28,200). Electric charging at home is treated differently and generally has no fuel benefit charge if no fuel is given.

Staying up to date:

HMRC guidance is updated each year. For example, HMRC’s table (Appendix 2) was updated in April 2026 to include the new 4% EV rate. Always check the latest GOV.UK guidance or use HMRC’s online calculator to estimate your specific tax.

Read: 5 VAT Strategies For Car Garages To Use In 2026

Key Points on Low-Emission Vehicles

Electric cars (0 g/km) enjoy very low tax. From April 2026, their BIK rate is 4%, up from 3% previously. The charge is based on list price, not fuel costs.
Plug-in hybrids are taxed by their declared CO₂ and electric range. A PHEV with a 100 miles range might pay 10–14%, whereas the same model with only 30 miles would pay 14–16%. The ranges and rates are in the table above.
Future changes: The government has signalled that EVBIK will rise by 2% each year until 2029. This was confirmed in the 2024 Autumn Budget. Consequently, the BIK rates for even very clean cars will gradually increase – though they will remain much lower than for fossil-fuel cars.

How We Help Businesses Manage Tax on Company Cars

At Apex Accountants, we help businesses and employees navigate company car taxation and other benefits. Our services include:

Tax planning for company cars: Advice on choosing cars, salary sacrifice schemes, and calculating company car BIK to minimise tax costs.
Payroll and Benefits administration: Managing P11D returns, payroll adjustments and ensuring the correct reporting of car benefits.
Company tax and VAT advice: Ensuring employer expenses and deductions (leasing, maintenance) are handled correctly.
Employee benefits consulting: Structuring car and fuel benefits packages that meet business needs and compliance requirements.

Whether you’re an employer arranging a fleet or an employee reviewing your company car deal, our experts can clarify the rules and optimise your tax position.

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FAQs About Tax on Company Cars

When do car tax rates change?

Company car BIK rates update every tax year (6 April). Recent uprating occurred in April 2025 and April 2026. The rates are normally set in Budget or tax announcements and then published by HMRC.

How do I know which CO₂ figure to use for my car?

HMRC gives tables in terms of grams per km under the WLTP (new) or NEDC (old) test cycles. Use the official CO₂ figure from the manufacturer’s spec. (When in doubt, HMRC’s calculator or your payroll department will use the correct value.)

What about tax on fuel costs?

If your employer pays for your private fuel, a separate fuel benefit charge applies. The car fuel multiplier is £29,200 for 2026/27. Electric charge at home generally isn’t taxed as fuel.

Can I reduce my car tax?

Yes. Paying a contribution toward the car’s value or insurance reduces the taxable benefit. Taking a cheaper car or an older car (with a lower list price) also lowers the overall tax.

Where can I find official information about tax on cars and other vehicles?

All rates and rules are published on GOV.UK. See HMRC’s Company car Benefit— appropriate percentage tables for each year and HMRC guides on company car tax.

April 2026 Car Tax Changes: What UK Drivers Need to Know About UK Vehicle Excise Duty

Posted on 4 March 20264 March 2026 by Farazia Gillani

From 1 April 2026, many motorists will pay more UK vehicle excise duty (VED). The increase is inflation-linked and applies across several parts of the system, not only the “headline” band for the highest CO₂ cars.

For most people, the change is modest. For buyers of brand-new, high-emission cars, the first-year bill can be eye-watering. And for electric vehicle owners, there is still tax to pay, even if the first-year rate stays low.

Also Read: Van Tax Changes and How they Affect Employer Vehicle Costs

Car Tax Changes on 1 April 2026

Area	What changes from 1 April 2026	Why it matters
Standard rate (most cars registered after April 2017, years 2+)	£195 → £200	Small rise for many drivers
Top first-year CO₂ band (new cars over 255 g/km)	£5,490 → £5,690	Up to £200 extra in year one for top emitters
Expensive Car Supplement (ECS) amount	£440 per year (years 2–6)	Extra cost on top of standard rate for expensive cars
ECS threshold for zero-emission cars	£40,000 → £50,000 (rule takes effect 1 April 2026)	Helps many EVs avoid the ECS if priced between £40k–£50k

How VED Works

For cars first registered on or after 1 April 2017, VED is usually split into two parts:

First-year rate (based on CO₂ emissions)
Standard rate (a flat annual rate from year two onwards)

On top of that, some cars pay the Expensive Car Supplement for five years (years 2–6).

For cars registered between 1 March 2001 and 31 March 2017, VED follows a different CO₂ band table and does not work the same way as the post-2017 system.

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The Big Headline: Higher First-Year Bills For High-Emission New Cars

If you are buying a new petrol or diesel car with very high CO₂ emissions, the first-year “showroom tax” can be the biggest cost shock.

For cars emitting over 255 g/km, the first-year rate rises to £5,690 from 1 April 2026. That is £200 more than the 2025–26 level.

This matters most if you are:

Buying a high-performance model
Buying a heavy SUV or large engine vehicle with high CO₂
Registering a brand-new vehicle close to the April changeover date

Read: VAT on Car Hire in the UK – What Businesses Need to Know

What About UK Vehicle Excise Duty on Electric Vehicles In 2026?

Electric cars are no longer fully exempt from VED. Under the rules that came in from 1 April 2025, new zero-emission cars pay a £10 first-year rate, and then pay the standard rate afterwards.

From 1 April 2026, that standard rate becomes £200 (up from £195).

There is also a helpful change for many EV buyers: the government is increasing the Expensive Car Supplement threshold for zero-emission cars to £50,000, effective 1 April 2026, for eligible vehicles registered from 1 April 2025 onwards.

Practical takeaway: an EV priced at £45,000 may avoid the ECS once the new threshold applies, while a petrol or diesel car still faces the £40,000 threshold.

VED For Older Cars (Registered 2001 To 2017): Rates Rise Too

If your car was registered between 1 March 2001 and 31 March 2017, your annual VED is still based on CO₂ bands.

Here are the top-end bands for 2026–27:

Band (2001–2017 system)	CO₂ emissions	Standard rate from 1 April 2026
L	226–255 g/km	£760
M	Over 255 g/km	£790

Planning Tips For Households And Businesses

Small increases add up, especially for fleets. A few sensible checks can protect cash flow.

If you are ordering a new car, confirm the official CO₂ figure and expected first-year VED before you sign.
If you run a fleet, build the new rates into your 2026–27 budgets and forecasts.
If you are considering an EV, check the list price carefully and whether the £50,000 ECS threshold will apply to your licence date.
Keep records tidy. For business vehicles, VED is typically treated as a running cost in the accounts, so clean bookkeeping helps your year-end work and reporting.

How We Can Help You Plan For Upcoming Car Tax Changes in UK

At Apex Accountants, we help drivers and businesses understand how motoring costs affect tax, budgeting, and cash flow.

Our support can include:

Fleet cost forecasting and budgeting reviews
Bookkeeping clean-up for vehicle and mileage records
Company structure and cost planning for vehicle-heavy businesses
Management reporting so you can track motoring costs month by month

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Conclusion

The April 2026 updates to UK vehicle excise duty are not a single “one-off” change. They raise the standard annual rate, increase first-year charges for the highest CO₂ cars, and adjust how the expensive car rules apply to many EVs.

If you want help modelling the cost impact for your household or fleet, contact Apex Accountants for a practical review and clear next steps.

FAQs About UK Road Tax

1. Is car tax rising for electric vehicles?

Yes. Since April 2025 EVs lost their tax exemption. A new EV now pays £10 in its first year and then £200 per year. However, EV buyers get a higher luxury threshold: if the car’s list price is under £50,000, the extra £425 tax doesn’t apply.

2. How does the luxury tax change?

The Expensive Car Supplement (also called luxury car tax) stays at £425 per year, but now only applies above £40k list price for petrol/diesel cars, and above £50k for EVs. This means many £40–£50k EVs bought since April 2025 are now exempt from the extra fee.

3. What about car tax on diesel cars?

Most diesel models follow the same bands as petrol. However, non-RDE2 compliant diesels still pay one band higher (up to £5,490 in 2025). The 2026 update likely maintains that rule.

4. What about car tax on Older cars (pre-2001)?

These are taxed by engine size. The 2026 rates (via RPI) are modest: e.g. £220 for 12 months on a small petrol car. For cars from 2001–2017, old CO₂ bands now have even the cleanest cars at £20 (no free road tax any more).

5. How to pay UK road tax & check?

You can pay or renew online via GOV.UK. Input your reg to see the exact VED due. If unsure, consult a tax professional for advice on company cars or vehicle financing, as these changes can affect tax planning.

6. Why are some people saying “£200 extra”?

That refers to the jump in the top first-year band for new cars over 255 g/km, which rises by £200 (to £5,690).

How the Pay-Per-Mile Tax on EVs Will Affect UK Drivers and Businesses in 2028

Posted on 19 November 202524 November 2025 by Nida Umair

As part of the upcoming Autumn Budget 2025, the UK government is set to introduce a new tax on electric vehicles (EVs) in the form of a 3 pence-per-mile charge. This move comes as part of efforts to compensate for the loss of revenue from traditional fuel duties. Here’s what UK drivers and businesses need to know about the proposed pay-per-mile tax on EVs.

What Is the New EV Tax?

The new charge, dubbed “VED+”, will apply to electric vehicles starting in April 2028. It is expected to be announced by Chancellor Rachel Reeves in the upcoming budget and will be open for consultation post‑announcement. The tax aims to ensure that EV drivers contribute fairly to the upkeep of the UK’s road infrastructure, a responsibility currently fulfilled by petrol and diesel drivers via fuel duties.

3p per mile tax: This charge is a fixed rate, applied on top of existing Vehicle Excise Duty (VED).
Implementation timeline: The tax will be introduced from April 2028, following a consultation period that will begin after the Budget announcement on November 26, 2025.
Why now?: The Treasury argues that, as more drivers switch to zero-emission vehicles, there is a need to maintain fairness in how road maintenance is funded across all types of vehicles.

Industry Concerns and Opinions on 3 Pence-Per-Mile Tax

The introduction of this new tax on EVs has received mixed reactions from industry experts and stakeholders, many of whom are concerned about the timing of the change. The Society of Motor Manufacturers and Traders (SMMT) has voiced concerns that this measure could discourage people from switching to electric cars at a time when the UK is striving to meet its zero-emission targets.

Key Concerns:

Deterrent to EV adoption: Many feel that adding an additional charge will make EVs less appealing, particularly when the upfront cost of electric cars is already high.
Hesitation from businesses: Fleet operators, who have already been grappling with EV adoption challenges, may reconsider the switch if running costs rise unexpectedly due to the new tax.
Impact on rural and high-mileage drivers: Those who drive significant distances or live in rural areas, where charging infrastructure is limited, could face disproportionate financial burdens under the new system.

As Jon Lawes from Novuna Vehicle Solutions stated, the new levy risks sending the wrong signal during a critical period for the UK’s net-zero transition.

What New EV tax Means for Businesses and Fleet Operators

For businesses that use EV fleets, this new tax could significantly affect running costs. For instance, a vehicle that drives 20,000 miles per year could incur an additional £600 in annual costs due to the tax.

Here’s a breakdown of the potential impact:

Fleet adoption: Businesses that have made the shift to electric fleets may hesitate to expand their EV investments, especially as operating costs could become more unpredictable.
Long-term planning: Fleet managers may now need to account for this additional charge in their long-term financial planning, adjusting fleet strategies and considering more affordable alternatives.
EV Salary Sacrifice: For businesses offering EV salary-sacrifice schemes, the impact of the pay-per-mile tax could change the tax efficiency of such programmes, making it vital for businesses to assess this new factor.

What Can You Do to Prepare For Pay-Per-Mile Tax on Evs?

While the new pay-per-mile tax on EVs isn’t set to come into force until 2028, businesses and individuals can begin preparing now by considering how this tax will affect their financial plans.

Here are a few steps to take:

Review EV adoption plans: Businesses should assess whether the introduction of the tax will affect their decision to switch to EVs. Some may need to rethink their fleet strategy to accommodate higher costs.
Maximise tax reliefs: Explore available tax incentives for EVs, including salary sacrifice schemes and benefit-in-kind tax exemptions.
Plan for future tax changes: Stay informed about government consultations and updates, and work with a tax advisor to ensure you’re prepared for any financial changes.

How Apex Accountants Can Help

At Apex Accountants, we provide tailored financial services to help businesses comply with the complicated changes in motoring tax, including the upcoming EV pay-per-mile tax. Our team of experts can support you with:

Tax planning for electric vehicle fleets: Helping you adjust to the new tax and ensure your business remains financially efficient.
Financial forecasting for EV adoption: Assessing the long-term impact of the pay-per-mile tax on your operating costs and adjusting strategies accordingly.
Support with EV salary sacrifice schemes: Ensuring that your employees can still benefit from tax-efficient EV schemes despite potential changes in taxation.

Conclusion

The introduction of a 3p per mile tax on electric vehicles marks a pivotal moment in the UK’s journey toward a zero-emission future. While the move aims to address funding shortfalls in road maintenance, it could present new challenges for businesses and drivers already grappling with the costs of EV adoption.

At Apex Accountants, we are here to guide you through the changes, ensuring that your business is well-prepared for the future of motoring taxation. Contact us today to discuss how expert tax planning can help you navigate upcoming changes.

FAQs on the New Tax on EVs?

What is the pay-per-mile tax, and what does it mean?

The pay-per-mile tax is a proposed charge for electric vehicles (EVs), where drivers would pay a fixed amount (around 3p per mile) based on how far they drive. This tax aims to compensate for the declining revenue from traditional fuel duties as more drivers switch to zero-emission vehicles

When would the per‑mile tax start?

The per-mile tax is expected to take effect from April 2028, after a public consultation following the Autumn Budget in November 2025.

Who will it apply to?

The tax will apply to zero-emission vehicles (EVs), including private cars and business fleets, as part of the government’s effort to fairly distribute road maintenance costs.

What will the rate be?

The proposed rate for the new tax is approximately 3p per mile, designed to offset lost revenue from fuel duties as more drivers switch to electric vehicles.

Will petrol/diesel drivers pay this too?

Currently, petrol and diesel drivers will not pay the new pay-per-mile tax, as they already contribute via fuel duty. This tax is specifically for electric vehicle owners.

Does this mean EVs will no longer be cheaper to run?

EVs will still have lower fuel and maintenance costs compared to petrol or diesel vehicles, but the introduction of the per-mile tax may reduce the overall cost advantage.

What about drivers who do low mileage?

For low-mileage drivers, the new tax will be less expensive than for high-mileage drivers, making it a potentially fairer system that scales with vehicle usage.

What are the concerns for rural or long-distance drivers?

Rural and long-distance drivers may face higher costs due to fewer charging options and longer travel distances, which could make the additional tax more burdensome for them.

Can businesses offset this tax?

Yes, businesses can offset the impact of the tax by seeking expert tax advice, adjusting fleet strategies, and leveraging available incentives to mitigate higher costs.

Is the policy definite?

The per-mile tax is not yet finalised and will be subject to public consultation after the Autumn Budget 2025, with further details expected to emerge in the following years.

What should I do now?

If you are considering EV adoption for your fleet or a salary-sacrifice scheme, it’s important to consult with a tax advisor to understand the potential financial impacts and plan accordingly.

VAT on Car Hire in the UK – What Businesses Need to Know

Posted on 23 October 202515 April 2026 by Farazia Gillani

Car hire is a regular expense for many UK businesses, whether used for client meetings, site inspections, or short-term transport needs. Yet, the VAT on car hire can be complex and easily misunderstood. Many businesses make errors when reclaiming VAT or fail to maintain adequate documentation, which can result in rejected claims or HMRC penalties.

At Apex Accountants, we help businesses across the UK understand the correct VAT rules for car hire. Our VAT specialists offer precise advice on reclaiming VAT, maintaining compliant records, and anticipating HMRC’s expectations during reviews or audits. With extensive experience in tax and VAT compliance, we help clients manage vehicle-related VAT efficiently and confidently.

This article explains how VAT applies to car hire, the conditions for reclaiming it, and the differences between business and private use. It also outlines practical compliance measures businesses should follow to stay accurate and audit-ready.

What Is the VAT Rate for Car Hire in the UK?

Car hire in the UK is subject to 20% VAT, charged on the full rental cost. This includes additional fees such as insurance, delivery, fuel, or cleaning charges. Whether the hire is for a day, a week, or a month, the VAT rate remains the same. However, the ability to reclaim VAT depends entirely on how the vehicle is used, not just the price or duration of hire.

How to Reclaim VAT on Car Hire

According to HMRC VAT Notice 700/64, VAT recovery on car hire depends on how long the car is hired for and whether it is available for private use.

Hires of 10 days or fewer: You can generally reclaim 100% of the VAT if the car is hired for a specific business journey, is used only for that business purpose, and is not made available for general private use. Evening or weekend use linked to that trip is ignored under HMRC’s short‑term hire concession.

Hires over 10 days or car leases: Where the car is available for any private use, only 50% of the VAT on hire or lease charges is recoverable. This 50% block applies even where most use is for business.

If a leased or long‑term hire car is demonstrably not available for private use at all, it may be possible to reclaim 100% of the VAT, but HMRC expects very strong evidence and this is uncommon in practice.

To claim VAT correctly, companies must keep clear and consistent evidence showing that the hire was solely for business activity. This includes:

Valid VAT invoice from the hire company
Mileage logs showing business journeys
Journey records (where to, client meeting, etc.)
Internal authorisation approving business use

Recovery Depends on Vehicle & Duration

Vehicle Type	Hire Length	VAT You Can Claim	What Proof You Need
Cars	≤10 days	100%	Invoice + business trip proof
Cars	>10 days	50% only	Invoice (logs don’t change 50%)
Vans	Any length	100%	All documents + exclusive business use proof

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When learning how to reclaim VAT on car hire, it’s essential to understand that HMRC requires strict proof of exclusive business use. For instance, if a director hires a car for site visits but drives it home overnight, that is considered private use — and VAT cannot be reclaimed.

Businesses that adhere to these documentation standards can recover input VAT legitimately while avoiding HMRC penalties or disallowed claims. Proper record-keeping ensures that claims are supported, compliant, and audit-ready.

When Is VAT on Car Hire Not Recoverable?

VAT cannot be reclaimed if a company car is available for personal use. This applies even when the majority of trips are business-related. For instance, if a director hires a car for a client visit but keeps it for a weekend getaway, HMRC will treat the VAT as non-recoverable.

Can VAT Be Reclaimed for Van or Commercial Vehicle Hire?

Yes. HMRC allows full VAT recovery on commercial vehicles, such as vans or trucks, because these are not classed as “cars” under VAT law. If a business exclusively uses a vehicle for commercial purposes and provides proper records and justification, they can claim VAT in full.

Case Study: Apex Accountants Supporting a Construction Client

A construction firm client of Apex Accountants regularly hired cars for site inspections across multiple regions. Initially, the company reclaimed VAT on all hire invoices, including instances where directors used the cars for personal travel.

Upon review, we identified non-compliant claims totalling over £8,700. We implemented a tracking and documentation process using mileage logs, travel purpose forms, and separate hire agreements for private use. The result:

Corrected past VAT errors before HMRC review.
Reclaimed legitimate VAT of £12,400 for pure business trips.
Improved compliance and reduced future risk of penalties.

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Record-Keeping for Compliance

Businesses should always retain:

VAT invoices for each hire
Signed agreements stating “business use only”
Mileage and journey records
Any internal authorisation for vehicle use

Expert VAT Guidance from Apex Accountants

At Apex Accountants, we help UK businesses identify reclaimable VAT, correct past submission errors, and strengthen audit trails to withstand HMRC scrutiny. Our VAT specialists review complex hire arrangements, provide detailed advice, and support every eligible claim with accurate documentation and clear reasoning.

We regularly assist clients who struggle to interpret the VAT rules for car hire, helping them distinguish between what qualifies as business use and what HMRC may consider private use. This clarity prevents costly errors and ensures all claims are compliant and defensible during audits.

Whether your business hires vehicles for short-term projects, regional operations, or long-term contracts, our team offers tailored VAT guidance designed to protect your compliance status and support efficient cash flow. We also review existing VAT records to identify missed opportunities for legitimate recovery.

With a proven record of success across multiple industries, Apex Accountants combine technical expertise with practical solutions that simplify complex VAT requirements.

Contact us today to arrange a consultation and find out how our specialists can help you handle VAT on vehicle hire confidently and efficiently

How R&D Tax Relief for Transport Technology Helps Innovators in Public Transport Systems

Posted on 2 September 202529 January 2026 by Nida Umair

The UK’s commitment to innovation is evident in its Research and Development (R&D) Tax Relief schemes. These schemes offer significant financial incentives to companies pioneering advancements in various sectors, including transport technology. For businesses developing next-generation public transportation solutions—such as contactless payment systems and AI-driven route optimisation— R&D tax relief for transport technology can substantially offset development costs.

Understanding R&D Tax Relief For Public Transport Systems

R&D Tax Relief is designed to encourage UK companies to invest in R&D by providing tax reductions or cash credits. To qualify, a project must aim to achieve an advance in science or technology by resolving scientific or technological uncertainties. This means that even if the project is unsuccessful, the company may still be eligible for relief. Eligible R&D costs for transport technology include staffing, software, consumables, and certain subcontracted work.

Key Areas of Innovation in Transport Technology

Contactless Payment Systems

The integration of contactless payment methods in public transport has revolutionised fare collection. Developing systems that allow passengers to use debit/credit cards or mobile wallets to pay for fares involves overcoming various technological challenges, such as ensuring security, integrating with existing infrastructure, and handling large volumes of transactions. Companies working on these systems can claim R&D Tax Relief for the technological advancements they achieve in payment processing and system integration.

AI Route Optimisation

Artificial Intelligence is increasingly being utilised to optimise public transport routes. By analysing real-time data, AI can predict traffic patterns, adjust schedules, and improve overall efficiency. Developing AI algorithms for complex urban transport networks is highly challenging, making such projects eligible for R&D Tax Relief.

Electric and Autonomous Vehicles

Electric Propulsion Systems: Developing new electric vehicle (EV) technologies and improving battery efficiency, energy storage, and charging infrastructure.

Autonomous Vehicles: Innovating self-driving vehicles requires significant technological advancements in sensors, machine learning, real-time data processing, and safety systems.

Sustainable Transport Solutions

Low-Emission Technologies: Companies developing alternative fuels, hydrogen-powered transport solutions, and carbon-neutral technologies for public transportation may qualify for R&D Tax Relief.

Recycling and Waste Reduction: Innovations in materials, such as biodegradable parts or sustainable manufacturing processes for public transport systems.

Fleet Management and Telematics

Fleet Optimisation: Companies working on telematics systems that provide real-time data for managing fleets more efficiently, reducing fuel consumption, or improving vehicle maintenance schedules can claim R&D Tax Relief.

Predictive Maintenance: Developing systems that predict vehicle failures or maintenance requirements before they happen through data analysis..

Recent Changes to R&D Tax Relief For Transport Technology

As of April 2024, the UK introduced a merged R&D Expenditure Credit (RDEC) regime. It replaced the old schemes with one system. Companies can now claim a taxable credit of 20% on qualifying R&D costs. For profitable firms, this equals a net benefit of about 15%. Loss-making companies may gain more, depending on their R&D intensity.

Eligibility Criteria For R&D Tax Relief For Public Transport Systems

To qualify for R&D Tax Relief, companies must:

Be subject to UK Corporation Tax.
Undertake projects that seek to advance science or technology.
Face scientific or technological uncertainties that cannot be easily resolved by a competent professional.
Incur eligible R&D costs for transport technology, such as staff wages, software, and consumables.

How Apex Accountants Can Help

At Apex Accountants, we specialise in assisting companies across the transport technology sector to successfully navigate the complexities of R&D Tax Relief claims. With over 20 years of experience in tax advisory, our dedicated team ensures that all eligible costs are identified, optimising your claim process and helping you secure the maximum benefit. Whether you’re developing innovative contactless payment systems or pioneering AI route optimisation, our expertise can help you access these valuable tax incentives with confidence.

We provide a comprehensive service that includes:

Identifying qualifying R&D activities and costs.
Assisting with the preparation and submission of your claim.
Ensuring your project meets the latest eligibility criteria.
Offering ongoing support to ensure compliance and maximise the benefits of your claim.

Our approach is tailored to your business needs, ensuring you benefit from the full scope of R&D tax credits available.

Conclusion

For companies at the forefront of developing innovative public transportation solutions, R&D Tax Relief offers a valuable opportunity to reduce financial risks associated with technological advancements. By leveraging these incentives, businesses can accelerate the development of next-generation transport technologies, contributing to a more efficient and sustainable public transport system. At Apex Accountants, we’re here to ensure your innovations receive the financial support they deserve. Contact us today to find out more about our research and development support services.

Tax Strategies for Fleet Operators in Clean Air Zones, Low & Ultra Low Emission Zones

Posted on 2 September 202529 January 2026 by Muhammad Asif

The rise of Clean Air Zones (CAZ), Low Emission Zones (LEZ), and Ultra Low Emission Zones (ULEZ) is changing fleet operations across the UK. These schemes aim to improve air quality but create tax, accounting, and financial challenges for fleet operators. At Apex Accountants, we help businesses navigate these issues. We offer tailored tax strategies for fleet operators to manage rising costs, fleet modernisation, and compliance with emissions standards.

The Problems Fleet Operators Face

1) Increased Operating Costs

Fleet operators must pay daily charges to enter CAZ, LEZ, and ULEZ zones. These charges are particularly burdensome for businesses that operate in cities like London, Birmingham, and Bristol, where the costs quickly add up, significantly increasing overall operating expenses.

2) Fleet Modernisation Pressure

As a result of these environmental traffic schemes, fleet operators must decide whether to retrofit existing vehicles or invest in new, compliant models. This decision is financially complex and requires careful tax planning to ensure cost-effectiveness. The pressure to meet environmental standards while maintaining profitability is high.

3) Compliance Complexity

Each city or region enforces different regulations, charges, and exemptions, creating compliance headaches for fleet operators. Businesses with vehicles crossing multiple zones face administrative challenges in keeping track of varied rules and fees, increasing the risk of penalties for non-compliance.

4) Route Planning Challenges

To avoid the high costs of entering these zones, fleet operators may need to reroute vehicles, leading to longer journeys, increased fuel consumption, and additional costs. This affects logistics efficiency and disrupts the flow of goods and services.

How Apex Accountants’ Tax Strategies For Fleet Operators Help

At Apex Accountants, we provide expert guidance and tax strategies that help fleet operators manage the challenges posed by Clean Air Zones, Low Emission Zones, and Ultra Low Emission Zones. Our services are designed to help businesses minimise costs and maximise financial relief opportunities while ensuring compliance with emissions standards.

1) Modelling Exposure to CAZ/LEZ Charges

We help fleet operators create detailed models to estimate the costs associated with entering CAZ/LEZ zones. These models assess daily, weekly, and seasonal charges, helping you make informed decisions about fleet replacement or retrofits. By understanding the financial impact, you can optimise your routes and plan for the best course of action.

2) Maximising Capital Allowances on Fleet Upgrades

Fleet modernisation often involves significant upfront costs. Through the full expensing scheme, Apex Accountants helps you claim 100% first-year capital allowances on eligible vehicles and equipment. Vans, trucks, and most fleet-related equipment qualify for this relief, allowing fleet operators to offset the cost of upgrading to compliant vehicles or installing necessary equipment at the depot. For unincorporated businesses, we also assist with maximising the £1m Annual Investment Allowance.

3) Accessing Government Grants and Funding

The UK government’s Plug-in Van and Truck Grant provides significant financial support for businesses transitioning to electric vehicles. This grant has been extended through 2027, helping you offset the initial investment costs. At Apex Accountants, we help align your vehicle purchases with grant windows and ensure you claim the maximum amount available to reduce your fleet’s costs.

4) R&D Tax Relief for Fleet Modernisation

Many fleet operators are investing in new technologies to improve efficiency, reduce emissions, and modernise their fleets. Whether it’s developing telematics, battery management systems, or retrofit solutions, these innovations often qualify for R&D tax relief. With the merged R&D scheme set to provide up to 20% credit on qualifying expenditures, Apex Accountants helps you prepare strong R&D claims, ensuring you benefit from valuable R&D tax relief for fleet modernisation while supporting your green fleet initiatives.

5) Optimising Benefits-in-Kind and Vehicle Choice

Starting in April 2025, double-cab pickups will be taxed as cars for benefit-in-kind purposes, increasing tax liabilities for both employees and employers. We review your fleet strategy to identify the most tax-efficient vehicle choices, helping you switch to cleaner, lower-emission models that minimise benefit-in-kind exposure and reduce Employer NICs.

Practical Solutions for Fleet Operators

Apex Accountants’ Actionable Fleet Tax Strategies

Prioritise vehicle replacement for high-mileage vehicles that frequently enter CAZ/LEZ zones to avoid ongoing charges.
Align your purchases with government grants and capital allowance opportunities to maximise tax relief and reduce upfront costs.
Bundle fleet upgrades (e.g., electric vehicle purchases, charging infrastructure) to optimise capital allowances and R&D claims in the same period.
Use local exemptions where available, such as discounts for electric vehicles or local residents, to reduce the financial burden on your fleet.

Why Choose Apex Accountants?

At Apex Accountants, we understand the unique challenges fleet operators face in today’s complex environmental landscape. Our team of experts offers tailored fleet tax strategies designed to help you manage the financial pressures of operating in Clean Air Zones, Low Emission Zones, and Ultra Low Emission Zones. From navigating compliance to maximising funding opportunities and reducing operating costs, Apex Accountants provides the support and expertise needed to ensure your fleet’s transition is financially beneficial and tax-efficient.

Get in touch today to learn how we can help optimise your fleet operations and minimise the impact of CAZ/LEZ/ULEZ charges on your bottom line.

VAT for Automotive Technology Startups in UK

Posted on 22 August 202514 November 2025 by Farazia Gillani

Automotive technology startups in the UK must deal with VAT from day one. Multi-currency transactions, software licensing, and international sales add layers of complexity that make compliance a priority. At Apex Accountants, we work with this sector to give clear, specific VAT guidance. This article explains the key rules on VAT for automotive technology startups, covering registration, R&D costs, international sales, and funding. It also highlights common mistakes, including issues with VAT on R&D for automotive startups, and shows how specialist advice can protect profitability.

VAT Registration Rules

A startup must register for VAT if taxable turnover exceeds £90,000 in 12 months. Automotive tech firms often cross this quickly due to high-value contracts or licensing fees. Voluntary registration below the threshold allows input VAT recovery on equipment, charging infrastructure, and software systems. Early registration is often strategic for cash flow.

VAT and R&D Expenditure

Automotive technology businesses invest heavily in research and development, from EV systems to AI-powered mobility platforms. Input VAT can be reclaimed on UK-supplied goods and services linked to these projects. Overseas research costs, however, are outside UK VAT and cannot be claimed back. Mistakes here are a frequent reason for HMRC enquiries. Getting specialist guidance on VAT on R&D for automotive startups helps improve the accuracy of claims and reduces compliance risks.

VAT Treatment for International Sales

Automotive tech startups often sell connected vehicle software, data subscriptions, or digital apps across borders.

Exports of goods are generally zero-rated if evidence of export is kept.
Digital services to EU customers fall under post-Brexit rules. Firms may need to register for the EU VAT OSS (One Stop Shop).
B2B services outside the UK usually fall under the reverse charge, shifting the VAT reporting obligation to the customer.

Failure to apply the correct rule can result in penalties and double taxation.

VAT on Grants and Funding

Government innovation grants for battery technology, clean transport, or software trials are common. VAT treatment depends on whether the grant is “free money” (outside scope) or linked to a deliverable (taxable). Misclassifying these items can result in repayment demands from HMRC. Each grant contract must be reviewed line by line for VAT impact.

Frequent VAT Errors in Automotive Tech

Treating software licensing for EU clients as zero-rated when it requires OSS reporting.
Claiming VAT on overseas R&D costs.
Ignoring VAT implications of collaborative grant funding.
Late MTD-compliant VAT return submissions due to complex revenue models.

Using digital record-keeping systems is now essential. Adopting solutions under MTD for automotive technology businesses reduces errors, improves accuracy, and ensures startups remain compliant.

Apex Accountants’ Expertise in VAT for Automotive Technology Startups

Apex Accountants provide tailored VAT support for automotive technology startups. We assist with VAT registration, correct treatment of grants, and compliance for cross-border digital services. Our team also manages HMRC correspondence and sets up systems that meet the requirements of MTD for automotive technology businesses, ensuring accurate recording of transactions from EV software licences to mobility app subscriptions.

VAT in this sector is highly technical, with risks linked to R&D claims, overseas sales, and innovation funding. We deliver detailed, sector-specific advice that protects profitability and reduces the chance of HMRC penalties. Contact Apex Accountants today for expert VAT guidance designed for automotive technology startups.

Why Cloud Accounting for Automotive Tech Startups is Essential for Scaling Internationally

Posted on 22 August 202514 November 2025 by Waheed Ahmed

Automotive technology startups in the UK face complex financial demands when expanding into overseas markets. From electric vehicle innovations to connected mobility platforms, scaling internationally brings multi-currency transactions, R&D incentives, and strict compliance requirements. Cloud accounting provides the financial infrastructure needed for controlled, sustainable growth. At Apex Accountants, we tailor cloud systems for automotive tech firms moving into global markets. This article explains why cloud accounting for automotive tech startups is essential, highlighting its role in compliance, R&D support, and international expansion.

Key Benefits of Cloud Accounting for Automotive Tech Startups Expanding Internationally

Cloud accounting gives the tools to manage global operations with accuracy and control. It offers reliable accounting solutions for automotive tech startups, helping them stay compliant while scaling across multiple regions. The following points illustrate how the organisation supports compliance, research and development (R&D), and sustainable international growth.

Real-Time Oversight for Tech-Driven Models

Automotive tech startups generate revenue from software subscriptions, hardware sales, and licensing agreements. Cloud systems like Xero and QuickBooks Online sync directly with banks, payment gateways, and investor funds. This provides real-time visibility into cash flow, contract renewals, and development costs. When scaling subscription-based platforms across Europe or Asia, founders can instantly see performance by market.

Multi-Currency and Taxation for Global Expansion

International expansion often requires billing customers in euros, dollars, or yen. Cloud platforms record all transactions in local currencies and consolidate reports with sterling. This reduces foreign exchange risk and simplifies financial reporting. Digital records automatically capture import VAT and customs duties for hardware exports. Cloud systems handle sales tax obligations for software in regions that impose taxes on digital services. Post-Brexit EU compliance is also streamlined through automated VAT reporting.

Supporting R&D and Grant Reporting

Automotive tech startups rely heavily on R&D for battery systems, autonomous vehicle software, and mobility apps. Cloud accounting tracks eligible R&D costs such as payroll, subcontracting, and prototype expenses. This data feeds directly into claims for R&D tax relief and Innovate UK grant reporting. Apex Accountants provides specialist R&D accounting services for automotive tech firms, ensuring accurate cost allocation and maximising available reliefs.

Integration with Global Supply Chains

Many automotive tech startups source components like sensors, batteries, or semiconductors from overseas suppliers. Cloud systems integrate with inventory platforms, providing landed cost data that includes tariffs, freight, and insurance. This supports accurate pricing strategies and strengthens supply chain planning when scaling into multiple regions.

Secure, Scalable, and Collaborative Growth

Cloud accounting platforms scale effortlessly as startups add new subsidiaries or joint ventures. Subscription-based pricing avoids heavy IT costs, preserving capital for R&D and product rollout. Bank-level encryption and ISO-certified compliance keep sensitive financial data secure. Multi-user access lets finance teams in London, engineers in Munich, and auditors in Tokyo work from the same records without delays.

Our Accounting Solutions for Automotive Tech Startups

At Apex Accountants, we specialise in helping automotive technology startups expand across borders. We configure cloud systems for sector-specific needs, from tracking intellectual property income to managing overseas payroll. We also provide compliance support for VAT, corporation tax, and international reporting standards, ensuring startups stay investment-ready.

For automotive tech startups, cloud accounting is not optional. It underpins global scaling by managing R&D claims, tax compliance, and cross-border transactions with precision. Apex Accountants delivers trusted R&D accounting services for automotive tech firms, helping founders maintain financial control while expanding internationally. Contact us today to discuss how Apex Accountants can support your international expansion with tailored cloud accounting solutions.