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
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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.

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