Two lines dominated the coverage of the Budget on 28 October for anyone who runs vans: fuel duty stays frozen, and mileage rates go up. Both are true. Neither is the whole story.
Read the documents rather than the headlines and a different picture emerges. Very little changes this winter. Almost everything that matters to a delivery operator or an owner-driver has been scheduled for 2027, and most of it lands at two points in the year: the start of April and 1 July.
The 2027 calendar
- 1 April 2027. The National Living Wage rises 3.9% to £13.21 an hour, and the National Minimum Wage for 18 to 20 year olds rises to £11.27.
- 6 April 2027. The mileage rate for business miles above 10,000 rises from 25p to 35p, both for the allowance employers can pay tax-free and for the simplified expenses rate the self-employed can deduct. The personal allowance and the employer National Insurance threshold stay frozen, as they will until April 2031.
- 1 July 2027. The 5p fuel duty cut ends and the planned inflation rise is applied on the same day: duty goes from 52.95p to 60.59p a litre. The HGV road tax holiday ends with it, and the VAT cut on household electricity runs out the day before.
- 1 April 2028. A pay-per-mile charge starts for electric and plug-in hybrid cars: 3p a mile for fully electric, 1.5p for plug-in hybrids. It was announced last year; vans are not included when it starts.
1 July 2027 is the date to plan around
The fuel duty decision was presented as help, and in the short term it is: the 3p rise due on 1 January and the 2p due on 1 March have been deferred, not removed. Both now land on 1 July 2027, together with the inflation uprating, and the government has already published the result: duty on diesel and petrol goes from 52.95p to 60.59p a litre.
That is 7.64p a litre in duty, or about 9.2p once VAT is added. If it is passed on in full at the pump, for a van at 30mpg it looks like this:
Ten vans at 20,000 miles each carry about £2,780 a year more from one day in July.
Fuel duty has not gone up since 2011, and each inflation rise pencilled in since then has been called off. It would be easy to assume this one will go the same way. That is a bet, not a budget. Any rate agreed now that runs past July 2027 should either price the step in or carry a fuel mechanism that moves with it. We set out what a workable fuel clause looks like in who pays when diesel moves.
The higher mileage rate will finally cover the diesel
The measure that matters most to owner-drivers has been reported as a modest increase. It is more significant than that, because the rate it replaces has stopped covering the cost it was meant to cover.
The rate for business miles above 10,000 has been 25p since approved mileage rates began in 2002. With diesel at 199.22p a litre, a van doing 30mpg burns about 30p of fuel every mile. For a high-mileage driver, every mile past the first 10,000 is being allowed at less than the price of the diesel, before tyres, servicing, insurance or wear.
At 35p the rate covers the diesel, but only just: at 30mpg and today's price it leaves under 5p a mile for everything else. At 25mpg diesel alone costs about 36p a mile, more than the new rate, and July's duty rise adds about 1.4p a mile at 30mpg on top.
The change applies to the approved mileage allowance that employers can pay tax-free and to the simplified expenses rate the self-employed can deduct. Take a self-employed courier covering 30,000 business miles a year and claiming simplified expenses:
- 2025-26: 10,000 miles at 45p and 20,000 at 25p, a deduction of £9,500.
- 2026-27: 10,000 miles at 55p and 20,000 at 25p, a deduction of £10,500.
- 2027-28: 10,000 miles at 55p and the remaining 20,000 at 35p, a deduction of £12,500.
For a basic-rate taxpayer, paying 20% income tax and 6% Class 4 National Insurance, £3,000 more in deductions is about £780 a year less in tax and National Insurance than in 2025-26.
Two cautions. Simplified expenses are optional, and you cannot use them for a van you have already claimed capital allowances on; once you start using them for a vehicle, you keep using them for that vehicle. A high-mileage driver with an expensive van can still be better off claiming actual costs, so run both before deciding.
For operators, the change has a second effect. The mileage rate is the benchmark drivers use when they talk about what their van costs, and for every mile above 10,000 it is about to go up by 40%. Expect it to come up in rate conversations.
Frozen thresholds: the rise nobody had to announce
The rise in employer National Insurance that arrives in 2027 was not announced this week. It comes from a freeze set in the November 2025 Budget. Employer National Insurance is charged at 15% on pay above £5,000 a year, and that £5,000 is frozen until April 2031. Pay keeps rising; the threshold does not.
Take a full-time driver aged 21 or over on the National Living Wage, working 40 hours a week:
- Pay rises from £26,437 to £27,477 in April 2027, an increase of 3.9%.
- Employer National Insurance rises from £3,216 to £3,372, an increase of 4.9%.
Every year the threshold stays frozen, the National Insurance on each pay rise grows faster than the pay rise itself. The £10,500 Employment Allowance covers the whole employer National Insurance bill for about three such drivers, but it is one allowance per employer, any other staff and directors use it up first, and some employers cannot claim it at all, such as a company whose only employee is a director. Beyond the allowance, every increase is a straight cost.
The same freeze applies on the other side of the payslip. The personal allowance stays at £12,570 until 2031, so more of each pay rise is taxed. And the £90,000 VAT registration threshold was not raised. A self-employed courier whose rates rise with costs will reach it sooner, without earning any more in real terms. Our VAT position calculator shows how close you are and what registering would change.
Costs index. Most rates do not.
Put the April and July changes side by side and the pattern is plain. The wage floor is reset every April, employer National Insurance rises faster than pay, and fuel duty returns with inflation built in. Almost every cost line of a delivery operation is indexed to something.
Most delivery rates are not. Per-drop, per-route and day rates are usually fixed until someone renegotiates them, and they rarely move on the same day the costs do. The gap between the two is where margin goes in 2027. The time to deal with it is before April, not after July: test each contract against next year's costs rather than this year's, and know the rate at which it stops paying. The contract viability calculator will do that in a few minutes.
Electric vans are spared, for now
The pay-per-mile charge that starts in April 2028 applies to electric and plug-in hybrid cars. Vans are not included when it starts, which is a relief for operators who have already made the switch.
It is also the clearest signal in the Budget about the long term. The charge exists because fuel duty brings in less as vehicles go electric. Vans being outside the scheme today is a decision about today. Anyone weighing an electric van over a five or six-year life should run the numbers with and without a per-mile charge, so that the decision does not depend on the exemption lasting.
What to do now
- Diary the dates. Put 1 April, 6 April and 1 July 2027 in the calendar as cost dates, and price any new contract with all three in view.
- Check the fuel terms. Every rate running past July 2027 should either include the fuel step or carry a fuel clause.
- Rerun your expenses. If you drive your own van for work, compare simplified expenses with actual costs for 2027-28 under the new rates.
- Rerun your payroll. If you employ drivers, rebuild next year's wage and National Insurance bill at £13.21 an hour from 1 April, with the threshold frozen.
Sources and scope
Measures and dates are from HM Treasury's Budget 2026 document and Policy Costings and HMRC's Overview of Tax Legislation and Rates (including the fuel duty rate from 1 July 2027 in its Annex A), all published on 28 October 2026. The fuel duty schedule before the Budget is from HMRC's amended fuel duty rates for 2026 to 2027, published on 22 May 2026. Current mileage rates and the simplified expenses rules are from HMRC guidance on gov.uk, and employer National Insurance rates, thresholds and the Employment Allowance from HMRC's rates and thresholds for employers 2026 to 2027. The freeze on the personal allowance and the employer National Insurance threshold until April 2031, and the pay-per-mile charge for electric cars, were announced in the November 2025 Budget. The diesel price is the UK average for the week beginning 26 October 2026 from the DESNZ weekly road fuel prices, as shown on the UK Logistics Pulse.
Worked examples assume 30mpg, 4.546 litres to the gallon, a duty rise passed on in full with the rest of the pump price unchanged, a 40-hour week paid for 52 weeks (the Treasury's own figure of £910 a year for the wage rise assumes 35 hours), and a self-employed courier with profits in the basic-rate band. Employer National Insurance figures are for drivers aged 21 or over; for younger employees, employers pay none on earnings up to £50,270. The examples illustrate how the measures interact; they are not tax advice. Your own position depends on your circumstances, and an accountant should confirm any decision about expenses methods or VAT registration.