Taxation (Energy and Vehicles) Act 2026

This page covers UK-wide law. Where local procedure differs (e.g. courts or tribunals), this is noted in the relevant section.

Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.

Summary

The Taxation (Energy and Vehicles) Act 2026 is a short supply Act making three tax changes. It raises the electricity generator levy on exceptional generation receipts from 45% to 55% for qualifying periods beginning on or after 1 July 2026, with time-apportionment for periods straddling that date. It increases the approved mileage amount for income tax purposes from 45p to 55p per mile — affecting both employees claiming mileage allowance relief under the Income Tax (Earnings and Pensions) Act 2003 and self-employed traders using fixed-rate mileage deductions under the Income Tax (Trading and Other Income) Act 2005 — with effect from the 2026-27 tax year. And it temporarily cuts vehicle excise duty for heavy goods vehicles used in the course of a trade to £1 for licences taken out between 1 July 2026 and 30 June 2027. The Act received Royal Assent on 15 July 2026 and, having no separate commencement provision, came into force on that day, each measure carrying its own effective dates.

Key Points

Raises the electricity generator levy from 45% to 55% of exceptional generation receipts (amending s.279 of the Finance (No. 2) Act 2023), for qualifying periods beginning on or after 1 July 2026 (s.1(1)-(2))
Straddling periods are apportioned on a time basis: 45% applies to receipts attributable to before 1 July 2026 and 55% on or after that date, with rules protecting pre-commencement corporation tax instalment payments (s.1(3)-(8))
Approved mileage amount rises from 45p to 55p per mile for cars and vans (first 10,000 miles) — for employee mileage allowance payments (ITEPA 2003 s.230(2)) and trader fixed-rate deductions (ITTOIA 2005 s.94F) — effective for tax year 2026-27 and subsequent years (s.2)
Vehicle excise duty for rigid goods vehicles and tractive units over 3,500kg revenue weight used in the course of a trade is reduced to £1 for vehicle licences (other than trade licences) taken out between 1 July 2026 and 30 June 2027 (s.3(1)-(5))
The six-month-licence supplement and first-licence rate for affected goods vehicles are reduced to £0 during the temporary period (s.3(6)-(7))
No commencement section — the Act took effect on Royal Assent (15 July 2026)