2025/26 company car taxable benefits: what drivers and employers need to know

CREATED BY ROGER EDDOWES Published: 13/11/2025 @ 09:00AM #company car taxable benefits #BenefitInKind #CompanyCars #ElectricVehicles #CarTax #HMRC

What are the company car taxable benefits for 2025/26? Well, with CO2 bands, list price rules, and future rate rises, this is a clear, upbeat take on HMRC changes. Use it to plan your company cars and electric vehicles with confidence ...

Company car brings perks, Taxable benefits abound, Driving with rewards

Most people want clarity, and when it comes to 2025/26 company car taxable benefits, clarity starts with a simple formula: multiply the car's list price by a percentage based on CO2 emissions, then apply income tax to that benefit in kind.

That percentage is anchored to HMRC tables!

These are capped at 37%, and nudged up by 4% for most diesel models unless they meet Euro 6d and were registered from the 1st of September 2017. Accessories are included in the list price, while an employee's capital contribution can reduce it by up to £5,000. With that foundation, the numbers start to make sense for both employers managing fleets and drivers comparing company cars.

You may like to know where the sweet spots sit, and for 2025/26 they sit squarely with zero and ultra‑low emissions:

• Fully electric vehicles attract a 3% charge, which is notably lower than the 5% charge for most petrol or diesel cars at comparable list prices.
• For plug‑in hybrids emitting 1–50g/km, the rate depends on pure electric range, with longer‑range models enjoying lower percentages.
• From 51g/km upward, each emissions band steps the percentage higher until the 37% ceiling is reached at 155g/km and beyond, making car tax predictable and deliberately progressive.

Planning works best with a view beyond one tax year, and the next few years are already mapped out by HMRC. For 2026/27 and 2027/28, bands under 75g/km rise by one percentage point each year, meaning electric vehicles move from 3% to 5% over that period.

Cars at 75g/km and above see a one‑point increase applied in 2025/26 only, after which those higher‑emission rates hold steady. This staged path gives employers time to adjust fleet policies, renew contracts and balance driver demand with whole‑life costs.

Clarity extends into 2028/29, where the rate for zero‑emission cars increases to 7%, and the 1–50g/km group moves to 18%, while other bands over 50g/km rise by one point with a new overall maximum of 38%.

From 2029/30, zero‑emission cars increase by a further two points and all others by one point, subject to a hard cap of 39%. That measured trajectory still leaves electric vehicles compelling, especially when combined with lower running costs, reduced maintenance, and a favourable employer National Insurance position on the benefit-in-kind.

Decision‑makers like levers, and there
are a few practical ones!

An employee capital contribution of up to £5,000 reduces the taxable list price, which can be decisive on higher‑spec models. Diesel drivers should check whether their cars qualify as Euro 6d to avoid the 4% supplement. Disabled employees may fall under special rules, so HR teams should align policies with HMRC guidance early to ensure no reliefs are missed or charges are misapplied. The correct figures in the right places keep audits clean and payroll accurate.

Fleet managers often find that the broad economics favour lower emissions even before tax is considered. When the benefit rate is multiplied by a realistic list price and then taxed at the employee's marginal rate, the monthly impact becomes tangible.

Switching from a mid‑band petrol to an efficient plug‑in hybrid or an EV can materially lower the benefit-in-kind and total cost of ownership.

Employers can amplify this with intelligent car policies that prioritise electric vehicles and longer‑range hybrids, matched to job roles and charging access. The result is a fleet that satisfies drivers, meets sustainability goals, and keeps car tax exposure in check.

It's also helpful to stress that accessories are included in the list price, so option choices matter and should be weighed against the benefit rate. Equally, timing matters: ordering before a new model year or aligning delivery with known rate changes can fine‑tune the benefit outcome.

Company cars remain a valued perk!

The winners will be those who model scenarios, carefully compare emissions bands, and keep pace with planned increases through 2029/30. Done well, company car taxable benefits become a transparent, budgetable part of reward strategy rather than an annual surprise.

Of course, the way Ms Reeves is looking to tax everything that moves at the next budget, what I've written in this blog post could change for the worse.

Watch this blog for my Autumn Budget 2025 announcement.

Until next time ...

ROGER EDDOWES
Join our mailing list! Click here and be one of the first to know when we publish a new blog post!

Share the blog love ...

Buffer Facebook Twitter Linkedin Pinterest WhatsApp #company car taxable benefits #BenefitInKind #CompanyCars #ElectricVehicles #CarTax #HMRC

About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

More blog posts for you to enjoy ...
		Employment Rights Act Timeline for Employers: What's Changing in 2026 and 2027 The Employment Rights Act will be implemented in phases across 2026 and 2027. My blog post guides you through the changes that occur and what to prepare for. It's a practical, conversational timeline for staying confident and...
		Government Makes Further Concessions on Inheritance Tax reforms for Farms and Firms Here's the latest on Inheritance Tax reforms: the APR/BPR allowance is rising to £2.5m. That should narrow the impact to the biggest estates while keeping planning practical. Less cliff-edge, clearer options, and more time to...
		Business costs are rising, yet smarter workers' rights reforms could ease pressure Business costs are rising, and bosses can feel it in wages and energy bills. However, the latest concessions on workers' rights could mitigate the impact and give firms more time to adapt. It's a pragmatic tweak that keeps pr...
		Key payroll changes for 2026 every UK employer should plan for now Key payroll changes for 2026 are mainly about higher wage floors, tighter thresholds and better forward planning. My blog post today walks through what shifts in PAYE, National Insurance, and compliance mean in practice. Cons...
		My predictions for small businesses in 2026: tax, tech and growth Here are my predictions for small businesses in 2026. I've been thinking about tax reporting changes, hiring incentives, cyber resilience, smarter AI use, sustainability data requests and new channels to market ......
		What HMRC using AI on social media really means for you Here's the lowdown on HMRC using AI to review social media in criminal tax probes. It's about more intelligent fraud detection with human oversight, not bots running wild. Taxpayers should receive clearer guidance and fewer e...
		How AI can help you prepare your tax return this year AI speeds up data capture and checks, while accountants provide guardrails. Use both to prepare your tax return with fewer errors and less hassle. It's efficient, affordable, and grounded in human oversight ......
		Merry Christmas 2025 from everyone at Essendon Accounts & Tax Not long to go now, and everyone at Essendon Accounts & Tax is looking forward to a well-deserved break over Christmas. We will be closing at 1pm on Wednesday the 24th of December 2025, returning at 8am on Tuesday the 5th...

Other bloggers you may like ...
		Small Business Owners: The new YourBOT wizard makes building your chatbot even easier! Posted by Steffi Lewis on https://www.yourbot.uk If you've ever tried to build a chatbot and thought,"Well, that got complicated quickly" (usually somewhere between settings screens and mild existent ...
		Making Tax Digital for the self-employed: thresholds, quarterly updates, and ways to stay calm Posted by Alison Mead on https://blog.siliconbullet.com Making Tax Digital for the self-employed will change how many sole traders and landlords handle income tax reporting. It's quarterly updates plus a ye ...
		Where corporate visitors stay in Milton Keynes for space, privacy and easy access Posted by Emily Freeman on https://blog.shortstay-mk.co.uk Wondering where corporate visitors stay in Milton Keynes? You'll see why many teams pick serviced accommodation from Short Stay : MK over hotels and A ...
		Three practical habits for better wellbeing in 2026 at work Posted by Dave Cordle on https://blog.davecordle.co.uk Here are three easy habits to make wellbeing in 2026 feel doable at work. You'll lower stress, protect your attention, and build steadier joy without ...