2026 State Budget: Vehicle taxes will yield more than €5.3 billion for the State

The Government has presented the State Budget proposal for 2026 (OE 2026) and, although no increases are planned for the main automotive taxes, the State is set to collect more revenue from the sector. The combined income from IUC, ISV, and ISP is expected to reach 5.367 billion euros, representing an overall growth of 4.7% compared to 2025.

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IUC

The Single Road Tax (IUC) is expected to generate 602 million euros in 2026, up by 32 million from the previous year (a 5.7% increase). According to the Ministry of Finance, this growth is linked to the positive performance of the automotive market and the rise in private consumption. The additional IUC applied to diesel vehicles in categories A and B, created in 2013 to penalize more polluting cars, will remain in effect without any changes.

ISV

As for the Vehicle Tax (ISV), the Government forecasts revenue of 511 million euros, 22 million more than in 2025, corresponding to a 4.6% increase. Here too, the rise is attributed to the expected growth in private consumption and demand for new vehicles. The ISV continues to apply to passenger cars, mixed-use vehicles, motorcycles, mopeds, and other motorized vehicles, and is calculated based on engine displacement and CO2 emissions.

ISP

The Tax on Petroleum and Energy Products (ISP) will once again be the State’s main source of automotive revenue. The Government expects to collect 4.254 billion euros, 187 million more than in 2025, representing a 4.6% increase. Despite this rise, the growth is lower than the previous year, when the end of the exemption on advanced biofuels and the gradual unfreezing of the carbon tax boosted revenue by 21.9%.

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The 2026 State Budget proposal does not include new tax increases or the end of the current discounts on ISP. However, the European Commission has been pressuring Portugal to eliminate the fiscal bonus that reduces fuel prices by 3.2 cents per liter for petrol and 11.7 cents for diesel — a change that could raise prices by up to 10%.

Thus, without any changes to tax rates, the State expects to collect more than 5.3 billion euros solely from taxes related to the purchase, ownership, and consumption of automobiles. A budgetary reinforcement driven by market dynamism and increased private spending, but one that, in practice, will continue to weigh on the wallets of Portuguese drivers.