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 ...
		Why the HMRC self-assessment tax return deadline keeps catching people out About a million people missed the HMRC self-assessment tax return deadline, and the knock-on costs can really add up. My blog post this week walks through why it happens, what HMRC fines can follow, and the smartest next step...
		Are we heading towards a Digital Pound? The BoE is certainly thinking about it Here's what a digital pound could look like and why it's being explored by the Bank of England. It wouldn't replace cash, and it certainly wouldn't be classed as crypto. The next couple of years are about design, testing and ...
		HMRC's Time to Pay agreements: a simple way to help pay your tax bill Need time to help pay your tax bill? HMRC's Time to Pay arrangements can spread a Self-Assessment balance into manageable monthly payments. File early, set up a plan if eligible, and keep an eye out for scams ......
		Cybersecurity tips for protecting your business, family and personal data Here are some cybersecurity tips you can actually use day to day, without getting overwhelmed. Learn how to spot common scams, verify requests safely, and lock down accounts with better habits. Think of it as a calm, practica...
		Why small businesses are dropping the green agenda as survival pressures rise Cashflow is getting tight for many small businesses, so dropping the green agenda is now a logical survival step. That's quite understandable. This blog post looks at why priorities are shifting and how firms can still move t...
		Can HMRC take money from your business bank account for unpaid tax? Wondering if HMRC can take money from your business bank account? They can, but only in limited cases, using the Direct Recovery of Debts process after repeated non-engagement, as long as key safeguards are in place. The opti...
		Scrapping Directors' Reports: More companies to become exempt Scrapping directors' reports is the government's latest push to simplify annual reporting. More firms could qualify for a strategic reporting exemption, and group accounts may cover more subsidiaries. This means less duplicat...
		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...

Other bloggers you may like ...
		Why our serviced accommodation in Milton Keynes suits overseas visitors best Posted by Emily Freeman on https://blog.shortstay-mk.co.uk If you're visiting from overseas, serviced accommodation in Milton Keynes gives you more space and a smoother routine than most hotels. You can work, ...
		Overcoming imposter syndrome at work: why high achievers often feel like frauds Posted by Dave Cordle on https://blog.davecordle.co.uk If imposter syndrome is nagging you at work, you're not alone. You'll learn why it hits high achievers and how it shows up day to day. After reading m ...
		Trial Bundle Creation: Why Online PAs Beat Last-Minute Panic Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Trial bundle creation is fiddly, time-sensitive, and often pushed to the last minute. An Online PA can take it off a solicitor's plate, build a compli ...
		Networking: I Don't Do Small Talk! Posted by Jacky Sherman on https://www.jackysherman.com I wish I had a pound for every time I've heard that. It's a common reason given by people who dislike networking because they see the banality of talk ...