Spring Forecast 2026: What UK Drivers and EV Salary Sacrifice Schemes Need to Know
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Updated: 18th February 2026.
On 3rd March 2026, the Office for Budget Responsibility (OBR) will publish an economic and fiscal forecast — what the government is now calling the Spring Forecast, rather than a Spring Statement. Chancellor Rachel Reeves has confirmed this will be an interim update on the economy and public finances, and will not include an assessment of the government's performance against its fiscal mandate. The government will respond to the forecast through a statement to Parliament, in keeping with its commitment to one major fiscal event per year at the Budget. No major new tax policies are expected — but for UK drivers and those considering an electric car salary sacrifice scheme, here's what the update means in practice.
What Is the Spring Forecast 2026?
The Spring Forecast differs from a traditional Spring Statement or Budget. The OBR has been asked to prepare an economic and fiscal forecast for publication on 3rd March — but crucially, this will not make any assessment of the government's performance against its fiscal mandate, and no new spending commitments or tax policies are anticipated.
Instead, the government will respond to the OBR's forecast through a statement to Parliament. This approach reflects the government's stated commitment to delivering one major fiscal event per year at the Budget, providing families and businesses with the stability and certainty they need.
For UK drivers and employees considering a salary sacrifice electric car, this means the Spring Forecast will largely confirm the direction of travel set out in the 2025 Autumn Budget — not introduce new disruption. Several significant changes are already affecting, or will soon affect, how much UK drivers pay to own and operate vehicles. Industry observers also anticipate the statement will provide clarity on the pace of the transition to zero-emission vehicles, particularly in light of the Zero Emission Vehicle (ZEV) mandate requiring manufacturers to ensure 33% of new car sales are electric in 2026.
Could the Spring Forecast Affect Your Pension? What Salary Sacrifice Employees Need to Know
One aspect of electric car salary sacrifice schemes that doesn't always receive enough attention is the potential impact on pension contributions. Because salary sacrifice reduces your gross pay before tax and National Insurance deductions are calculated, it can also affect your pensionable earnings — and the Spring Forecast is unlikely to change this dynamic.
In practice: if your pension contributions are calculated as a percentage of your basic salary, reducing that salary through an electric car salary sacrifice scheme could slightly lower both your own contributions and, in some cases, your employer's contributions. For defined contribution (DC) pension schemes — the most common type for private sector employees — this is worth discussing with your HR team or an independent financial adviser before signing up.
For the vast majority of employees, however, the tax and National Insurance savings from an electric car salary sacrifice scheme significantly outweigh any marginal reduction in pension contributions. A higher-rate taxpayer saving 20–50% on an electric vehicle through salary sacrifice, combined with a 4% BiK rate from April 2026, will typically see net monthly savings that comfortably exceed any small pension impact. Many employers also choose to base pension calculations on pre-sacrifice salary to eliminate this concern entirely — it's worth checking your company's policy.
The government has not indicated any plans to change how salary sacrifice interacts with pension calculations. The existing framework, under which salary sacrifice reduces National Insurance for both employees and employers, remains intact — and employers are free to pass on their NI savings to further boost employee pension contributions if they choose. This is one of the reasons why electric car salary sacrifice continues to be regarded as one of the most compelling employee benefits available in 2026.
How Much Does London's Congestion Charge Cost Now?
London's daily congestion charge increased to £18 on 2nd January 2026, up from the previous £15 rate. This 20% increase affects drivers entering the zone between 7am and 6pm on weekdays, and between noon and 6pm on weekends and bank holidays.
Electric vehicle drivers previously enjoyed a 100% exemption under the Cleaner Vehicle Discount, but this ended on 25th December 2025. EV drivers must now pay the congestion charge, though those registered for Auto Pay receive a 25% discount, reducing the daily cost to £13.50.
Electric vans, HGVs, and quadricycles qualify for a larger 50% discount through Auto Pay, reflecting their commercial importance. These discounts apply only to vehicles registered with Transport for London's automated payment system — drivers paying by other methods pay the full £18 charge.
The Spring Forecast is unlikely to address congestion charging specifically, as this falls under Transport for London's jurisdiction rather than central government policy.
What Are the Confirmed Road Tax Changes for Electric Vehicles?
Electric vehicles registered from 1st April 2025 onwards now pay Vehicle Excise Duty (VED) for the first time. The government confirmed in the 2025 Autumn Budget that new electric cars pay £10 in the first year, then £195 annually from the second year onwards. This brings EVs into the standard VED system after years of zero-rate exemptions.
The "expensive car supplement" — an additional £425 annual charge — applies to vehicles with a list price above £40,000. However, the threshold for electric vehicles increased to £50,000 from April 2026, meaning EVs priced between £40,000 and £50,000 avoid this supplement. Petrol and diesel vehicles still face the supplement at the £40,000 threshold.
For vehicles emitting more than 225g of CO₂ per kilometre, VED rates continue rising. The Spring Forecast is expected to confirm the detailed VED bands for 2026/27. Cars in the 226–255g/km band are projected to pay approximately £760 annually (up from £735), whilst vehicles exceeding 255g/km will pay around £790 (up from £750). Lower-emission bands should see smaller increases, with some remaining unchanged.
How Will the BiK Rate Change Affect Electric Car Salary Sacrifice?
The Benefit-in-Kind tax rate for electric vehicles is confirmed to increase to 4% from April 2026, rising from the current 3% rate. The government has already announced that BiK rates will increase by 1% annually until 2027, then by 2% annually, capping at 9% in 2029. The Spring Forecast is expected to reaffirm this trajectory — not alter it.
Despite this increase, electric vehicles remain extraordinarily tax-efficient compared to petrol and diesel alternatives. High-emission conventional vehicles face BiK rates of up to 37%, meaning electric car salary sacrifice schemes continue delivering substantial savings. A 40% taxpayer with a £40,000 electric car will pay approximately £53 monthly in BiK tax (£640 annually) from April, compared to £493 monthly (£5,920 annually) for a similarly priced high-emission petrol car.
The Electric Car Scheme's salary sacrifice model remains unaffected by these changes, with employees still saving 20–50% compared to traditional car ownership or personal leasing. The combination of reduced Income Tax, National Insurance savings, and ultra-low BiK rates makes electric car salary sacrifice one of the most tax-efficient employee benefits available.
When Will Fuel Duty Increase?
The 5p-per-litre fuel duty cut, in place since March 2022, is expected to be extended until 31st August 2026 according to pre-statement briefings. This temporary measure has kept fuel duty frozen at 53p per litre rather than the planned 58p.
The Chancellor is expected to confirm that from September 2026, fuel duty will increase gradually: 1p per litre in September, an additional 2p in December, and another 2p in March 2027. By April 2027, fuel duty should return to pre-pandemic levels, adding approximately 5p per litre to petrol and diesel prices.
For average drivers covering 10,000 miles annually, this represents an additional £100–150 in annual fuel costs once fully implemented. This change further improves the relative economics of electric vehicle ownership, where charging typically costs 3–5 times less per mile than petrol. The Spring Forecast should provide final confirmation of these timelines.
Could Pay-Per-Mile Road Tax Replace VED? What EV Drivers Must Prepare For
One of the more significant long-term questions hanging over the UK motoring landscape is whether the government will eventually replace Vehicle Excise Duty with a pay-per-mile road pricing system. With electric vehicles now paying VED for the first time, and fuel duty revenues forecast to decline sharply as petrol and diesel car sales phase out by 2035, the Treasury faces a substantial funding gap. Road pricing has been discussed as the most logical solution — and the Spring Forecast may offer fresh signals on the government's direction.
To be clear: no confirmed implementation date or specific policy has been announced. Government consultations have explored how a distance-based system could work, but any formal roll-out remains years away. The Spring Forecast is expected to reference ongoing work in this area without committing to a firm timeline.
For electric car drivers, the outlook under any future pay-per-mile system is cautiously positive. Government documents and independent analyses consistently suggest that preferential per-mile rates for zero-emission vehicles would be built into any scheme, preserving the relative cost advantage of EVs over petrol and diesel cars.
For employees using an electric car salary sacrifice scheme, the practical implications today are minimal. Monthly payments, BiK tax, and employer protections remain unchanged by consultation activity. The Electric Car Scheme will continue monitoring developments and updating guidance as government policy becomes clearer.
What Is Euro 7 and When Does It Start?
Euro 7 represents the European Union's seventh and final evolution of vehicle emissions standards, taking effect from 29th November 2026 for newly launched cars and vans requiring type approval. By 29th November 2027, all new vehicles on sale must meet Euro 7 standards or be withdrawn from the market.
Euro 7 introduces several groundbreaking changes. For the first time, emissions standards regulate non-exhaust pollution, including brake dust and tyre particles. Electric vehicles face these requirements despite producing zero tailpipe emissions, as particulate pollution from brakes and tyres affects all vehicle types.
The standard extends compliance requirements to 10 years or 200,000 kilometres (125,000 miles), double the previous Euro 6 requirement. Vehicles must maintain emissions compliance under broader real-world conditions, including extreme temperatures, short trips, high speeds, and towing scenarios.
Euro 7 also mandates battery durability requirements for electric vehicles. Batteries must maintain effective performance for a set period, increasing consumer confidence in EV longevity. The European Commission estimates Euro 7 will add approximately £264 to the cost of new vehicles, though manufacturers may absorb some costs through efficiency improvements. For electric car salary sacrifice users, these costs are typically bundled into lease agreements with minimal impact on monthly payments.
How Do Digital Driving Licences Work?
The UK government began the public rollout of digital driving licences in February 2026 through the GOV.UK One Login app. This optional digital credential allows drivers to store their driving licence securely on smartphones, complementing rather than replacing traditional plastic photocards.
The digital licence displays the same information as physical cards: name, photograph, licence number, expiry date, date of birth, address, and driving entitlements. Users access credentials through biometric authentication or two-factor verification, providing bank-level security that makes digital licences potentially more secure than physical cards vulnerable to theft or loss.
Digital licences offer several practical advantages. Changes to addresses or driving records update automatically through DVLA databases, eliminating postal delays. New drivers receive credentials within hours rather than days. The app enables quick verification when hiring vehicles, potentially streamlining rental processes significantly.
DVLA and motoring experts strongly recommend keeping physical photocards as backups — a dead phone battery shouldn't prevent hiring a vehicle or managing roadside checks. By the end of 2027, government policy requires all official documents to offer digital alternatives alongside physical versions.
What Will These Changes Mean for Electric Car Salary Sacrifice?
Despite the taxation changes expected to be confirmed through the Spring Forecast, electric car salary sacrifice schemes will remain exceptionally cost-effective. The 4% BiK rate from April, whilst higher than the current 3%, represents less than half the rate for low-emission petrol cars and just a fraction of the 37% maximum for high-emission vehicles.
The Electric Car Scheme continues offering employees savings of 20–50% compared to traditional car ownership. These savings come from three sources: reduced Income Tax on the sacrificed salary portion, National Insurance savings for both employees and employers, and ultra-low BiK rates that keep the taxable benefit minimal.
For a typical higher-rate taxpayer leasing a £40,000 electric car through salary sacrifice from April 2026:
| Monthly lease cost | £584 |
|---|---|
| Income Tax savings | -£234.00 |
| National Insurance savings | -£12.00 |
| BiK tax (at 4%) | £53 |
| Net monthly cost | £391 |
This represents a 33% reduction compared to leasing the same vehicle independently, even accounting for the BiK rate increase from April. When combined with significantly lower charging costs compared to petrol — typically 7–15p per mile for electricity versus 15–20p for petrol — the total cost of ownership remains dramatically lower for electric vehicles.
Road tax additions of £195 annually represent approximately £16 monthly — a modest increase typically absorbed within lease agreements. Congestion charge changes primarily affect London-based drivers, whilst the broader UK workforce continues benefiting from tax-efficient electric car access.
How Should Employees Prepare for These Changes?
For employees considering an electric car salary sacrifice scheme, 2026 remains an excellent time to make the switch — before or after the Spring Forecast. Despite gradual increases in various taxation areas, the fundamental value proposition of electric car salary sacrifice remains compelling.
The key consideration is understanding your total cost of ownership rather than focusing solely on individual tax changes. When evaluating whether to proceed with salary sacrifice, consider the following:
Tax efficiency — even with a 4% BiK rate from April, electric cars deliver exceptional tax advantages compared to conventional vehicles. The savings on Income Tax and National Insurance typically exceed the BiK tax payable.
Running costs — electric vehicles cost substantially less to fuel and maintain. These operational savings often exceed £1,000 annually compared to equivalent petrol vehicles, even accounting for VED and potential congestion charges.
Included services — salary sacrifice packages typically bundle insurance, maintenance, servicing, breakdown cover, and road tax into monthly payments, simplifying budgeting and eliminating unexpected costs.
Employer support — unlike personal leases, salary sacrifice schemes involve no credit checks and minimal administrative burden. Your employer arranges the lease, whilst you benefit from pre-tax salary deductions.
The Spring Forecast is unlikely to change any of these fundamentals, making the period ahead of the new tax year in April an ideal time to explore your options.
What Should Employers Consider Ahead of the Spring Forecast?
For businesses offering or considering electric car salary sacrifice schemes, the expected confirmations through the Spring Forecast present minimal disruption. The Electric Car Scheme remains cost-neutral for employers — setup and running costs are covered by employer National Insurance savings, creating a genuinely zero-cost employee benefit.
The gradual increase in BiK rates to 4% from April was announced well in advance, allowing businesses to communicate changes transparently to employees. Most providers, including The Electric Car Scheme, automatically update calculations when rates change, ensuring employees understand their true monthly costs from April onwards.
Companies committed to environmental, social, and governance (ESG) goals will find electric car salary sacrifice increasingly valuable. Every EV replacing a conventional car contributes directly to Scope 3 emissions reductions — indirect emissions from employee activities that increasingly factor into corporate carbon reporting.
With Euro 7 standards arriving in November 2026, vehicles obtained through salary sacrifice schemes will meet the strictest environmental standards available. This future-proofs fleet choices whilst supporting corporate sustainability objectives, regardless of what the Spring Forecast confirms.
Looking Ahead: What the Spring Forecast May Signal
Beyond confirming already-announced measures, the Spring Forecast may provide signals about future policy direction. Several developments will shape the UK driving landscape in the years ahead.
The ZEV mandate requires 33% of new car sales to be electric in 2026, rising to 80% by 2030 and 100% by 2035. The response to the OBR's forecast may address whether the government plans any flexibility mechanisms or review of these targets in light of current market conditions.
Government investment of £200 million supports continued expansion of public charging networks, addressing range anxiety concerns and improving EV accessibility for drivers without home charging. The parliamentary response to the forecast may also provide updates on deployment progress.
Ongoing advances in battery chemistry and manufacturing continue reducing costs whilst improving range and charging speeds. These improvements make electric cars increasingly competitive with conventional vehicles on every metric.
What the Spring Forecast 2026 Means for UK Drivers
When the OBR publishes its Spring Forecast on 3rd March and the government responds to Parliament, UK drivers can expect confirmation of several taxation changes affecting vehicle ownership — but the fundamentals of electric car ownership will remain highly attractive. BiK rates for electric vehicles, whilst increasing to 4%, remain a fraction of rates for conventional cars. VED charges of £195 annually represent a modest addition to total ownership costs. Congestion charge changes primarily affect London-based drivers.
Most significantly, electric car salary sacrifice schemes will continue offering exceptional value. The combination of pre-tax salary deductions, National Insurance savings, and ultra-low BiK rates delivers 20–50% savings compared to traditional car ownership — benefits that comfortably offset the modest taxation increases taking effect in 2026.
For employees considering the switch to electric, 2026 remains an opportune moment. For businesses evaluating employee benefits, the electric car scheme UK offers a cost-neutral way to enhance packages whilst supporting sustainability objectives. As the UK continues its transition to zero-emission transport, salary sacrifice schemes provide an accessible, tax-efficient pathway for employees and employers alike.
The Electric Car Scheme will provide a full update following the OBR's Spring Forecast on 3rd March and the government's subsequent parliamentary statement — monitoring any implications for electric car salary sacrifice schemes and UK drivers.
FAQ: Spring Forecast 2026 and Electric Car Salary Sacrifice
What is the Spring Forecast 2026?
The Spring Forecast 2026 is an economic and fiscal update published by the Office for Budget Responsibility (OBR) on 3rd March 2026. Unlike a full Budget, it does not introduce new tax policies or assess the government's performance against its fiscal mandate — it provides an interim update on the economy and public finances. The government will respond through a statement to Parliament.
Is the Spring Forecast 2026 the same as a Spring Statement?
No. The government has moved away from the Spring Statement format in favour of a single major fiscal event per year at the Budget. The Spring Forecast is an OBR-led economic update, not a Chancellor-led policy announcement. No new spending commitments or tax changes are expected on 3rd March.
Will the Spring Forecast 2026 change electric car salary sacrifice?
No. The Spring Forecast is not a fiscal event and is not expected to introduce any new policies affecting electric car salary sacrifice schemes. Employees can continue to save 20–50% on an electric car through salary sacrifice, and the 4% Benefit-in-Kind rate confirmed for 2026/27 remains unchanged.
What is the BiK rate for electric cars in 2026?
The Benefit-in-Kind (BiK) rate for electric vehicles rises to 4% from April 2026, up from 3% in 2025/26. This is still dramatically lower than the maximum 37% rate for high-emission petrol cars, making electric car salary sacrifice one of the most tax-efficient employee benefits available.
How much can I save with an electric car salary sacrifice scheme in 2026?
Employees can save between 20% and 50% on an electric car through salary sacrifice, depending on their tax bracket and the vehicle chosen. Savings come from reduced Income Tax, National Insurance contributions, and the ultra-low 4% BiK rate — significantly undercutting the cost of a personal lease or outright purchase.
When is the OBR Spring Forecast 2026?
The OBR Spring Forecast is scheduled for publication on 3rd March 2026. The government will follow with a statement to Parliament responding to the forecast's findings.
Will fuel duty increase in 2026?
The 5p-per-litre fuel duty cut is expected to be extended until 31st August 2026. From September 2026, fuel duty is anticipated to rise gradually, returning to pre-pandemic levels by April 2027 — adding approximately 5p per litre to petrol and diesel prices. This makes the running cost advantage of electric cars even more pronounced.
Do electric cars pay road tax in 2026?
Yes. Electric vehicles registered from 1st April 2025 now pay Vehicle Excise Duty (VED) for the first time. New EVs pay £10 in their first year, then £195 annually from the second year onwards. EVs priced between £40,000 and £50,000 are exempt from the expensive car supplement, unlike equivalent petrol vehicles.
Does electric car salary sacrifice affect my pension?
It can, in some cases. Because salary sacrifice reduces your gross pay, it may slightly lower pensionable earnings and, in turn, pension contributions calculated as a percentage of salary. However, for most employees the Income Tax and National Insurance savings from an electric car salary sacrifice scheme significantly outweigh any marginal pension impact. Many employers also base pension calculations on pre-sacrifice salary — check your company's policy before signing up.
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Last updated: 18.02.26
Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme's terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
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