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 ...
		New tax return rules for company directors create uncertainty The new tax return rules for company directors aim to improve reporting but also cause confusion. Directors and traders must provide more detail in their self-assessment returns, yet HMRC guidance leaves gaps. Many will wait ...
		Summer holiday VAT reduction for families: what it means for days out The Chancellor has announced a summer holiday VAT reduction for families, which may ease the pressure a little on meals, tickets and family days out. The catch is that the rules are narrow, the window is short, and businesses...
		HMRC mileage rate increased to 55p on the 6th April 2026 On the 6th April 2026, HMRC increased the approved mileage rate to 55p per mile for the first 10,000 business miles. It's a helpful change for employees and the self-employed, and it may be worth reviewing reimbursements, pay...
		HMRC AI fraud detection: how new technology will spot tax return errors AI-based fraud detection is set to help HMRC spot mistakes, suspicious patterns and missed payments more quickly. The idea is simple: artificial intelligence supports staff, while people still make the final call ......
		Understanding the new FSCS protection limit Many business owners and savers may have received messages from their bank about changes to the Financial Services Compensation Scheme (FSCS). The key update is that the protection limit for eligible deposits has increased fr...
		UK economic growth as price pressures build UK economic growth has remained surprisingly resilient, but higher prices are making households and firms more cautious. The big question is whether inflation costs translate into lasting wage pressure, which would force the ...
		What are the key business takeaways from the 2026 King's Speech? The 2026 King's Speech points to faster payments, smarter regulation and tougher cyber rules. It also signals a more pro-growth approach to government policy, with businesses likely to feel the impact quickly ......
		British businesses facing financial stress surge across the country British businesses facing financial stress are feeling the squeeze from higher taxes, rising costs and shaky consumer confidence. Hospitality and leisure are under the most pressure, while many firms are also grappling with c...

Other bloggers you may like ...
		Why do businesses staying visible online usually work systematically? Posted by Steffi Lewis on https://www.sblogit.com Businesses that stay visible online rarely achieve it by chance. While it can sometimes look as though competitors are constantly appearing on Google, ...
		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 ...
		Why our serviced accommodation in Milton Keynes beats traditional hotel stays Posted by Emily Freeman on https://blog.shortstay-mk.co.uk Here's why our serviced accommodation in Milton Keynes is a smarter choice than a hotel. Expect more space, better Wi‑Fi, and the freedom to live on y ...
		How to prepare for a job interview with less stress and more success Posted by Dave Cordle on https://blog.davecordle.co.uk If you want to prepare for a job interview without spiralling, focus on what matters: the role, your evidence, and your questions. You're not there to ...