What businesses need to know about changes to company car tax

Recent updates to company car taxation are set to reshape fleet strategies, impacting costs for businesses over the long term.  

With Benefit-in-Kind (BiK) rates confirmed until 2029/30, is it time to review your options and plan ahead? 

The impact of rising BiK rates 

From 2025/26, BiK rates for all company cars will increase, but not equally: 

• Electric vehicles – BiK will rise by one per cent annually, reaching nine per cent in 2029/30. 

• Petrol and diesel cars – Rates will climb gradually, hitting a maximum of 39 per cent in 2029/30. 

• Hybrids – Until 2027/28, BiK depends on the car’s electric range, with the most efficient hybrids taxed at just five per cent. From 2028/29, all hybrids will be taxed at a flat 18 per cent, rising to 19 per cent in 2029/30. 

Is electric still worth it? 

While electric vehicles (EVs) remain a popular choice, rising costs and tax changes could impact their attractiveness: 

• Vehicle Excise Duty (VED) – The current exemption ends in April 2025. EVs will then be taxed at the standard VED rate. 

• BiK advantage – Despite increases, EVs remain far more tax-efficient than petrol, diesel, or hybrid cars. 

• First-year allowances – Extended until March 2026, businesses can still claim relief for zero-emission vehicles and charging infrastructure. 

EVs also enhance a company’s environmental credentials and appeal to employees, but challenges like charging infrastructure and range limitations remain important considerations. 

Are company vans a simpler tax solution? 

Vans offer a more predictable tax structure. Instead of percentage-based BiK charges, vans are taxed at a flat rate which is currently £3,960 per year, rising with inflation from April 2025. 

However, changes to double-cab pickups mean that, from April 2025, pickups with a payload of one tonne or more will be taxed as cars, not vans.  

Transitional rules allow existing pickups leased or purchased before April 2025 to retain van treatment until 2029, offering businesses a short-term opportunity to save. 

Tax changes to company cars and vans are complex, but careful planning can help businesses manage costs and make decisions that will benefit them in the long run.   

Contact us today for advice to ensure your fleet is tax-efficient and future-proof.