Company Car Tax – An Overview
More and more people seem to be driving company cars at the moment, however it can be fairly complicated to grasp the complexities of how the taxation situation will affect you. In this handy guide we’re going to explore the legislation, providing an in-depth analysis of company car tax rates, also known as the ‘BIK rate’, which will allow you to understand if it makes sense to get one yourself, and what type of vehicle is best for you..
Has Company Car Tax changed?
Company car tax rates currently remain unchanged from the 2023/24 tax year, and it was announced in the Autumn Statement 2023 that car and van charges will be frozen until the 2025/26 tax year.
To find out how much you will have to pay, you need to take the list price of the vehicle (also called the P11D) and multiply it by the relevant percentage using the table provided further down in this article.
Benefit in Kind (BIK)
Under the company car tax system, employees and directors of companies pay tax on the Benefit in Kind (BIK) for the use of the company cars, which is set by HMRC and are based on a vehicle’s CO2 emissions.. The BIK charge is calculated by applying a percentage to the official value of the company car (the P11D).
The percentage of tax paid is affected by the level of the company car’s CO2 emissions. More emissions equals a higher rate. The BIK is then taxed at the personal tax rate of employees.
Price of vehicle (P11D) x BIK rate % = tax paid
How does the type of vehicle affect the company car tax rate?
Electric cars
Electric cars with zero emissions receive the most favourable company car tax treatment. For the 2024-2025 tax year, fully electric cars are subject to a 2% BIK rate, meaning only 2% of the car’s list price is used to calculate the employee’s tax liability. From April 2025, the BIK rate will increase by 1% every year until 2028.
Hybrid cars
For hybrid company cars, the company car tax benefits are determined by the distance that the vehicle can travel solely on battery power. The further your car is able to go, the more you’ll be able to benefit. If you drive a hybrid car that emits less than 50g/km, the rate will be based on the zero-emissions range.
Company Vans
The BIK rate on a van is set at a flat rate of £3960 until the end of the 2025/26 tax year. If you’re an employee, your personal tax bill will be based on whether you’re a 20% or 40% taxpayer – people in the lower bracket will pay tax on 20% of £3960, which equates to £792, or £66 per month. 40% taxpayers will face a bill of £1584 a year, or £132 per month.
Take a look at the table below to see what taxable benefits your choice of company car offers you:
Table of company car tax rates:
| CO2 (g/km) | Electric range (miles) | 2024/25 (%) | 2025/26 (%) | 2026/27 (%) | 2027/28 (%) |
| 0 | N/A | 2 | 3 | 4 | 5 |
| 1-50 | >130 | 2 | 3 | 4 | 5 |
| 1-50 | 70-129 | 5 | 6 | 7 | 8 |
| 1-50 | 40-69 | 8 | 9 | 10 | 11 |
| 1-50 | 30-39 | 12 | 13 | 14 | 15 |
| 1-50 | <30 | 14 | 15 | 16 | 17 |
| 51-54 | 15 | 16 | 17 | 18 | |
| 55-59 | 16 | 17 | 18 | 19 | |
| 60-64 | 17 | 18 | 19 | 20 | |
| 65-69 | 18 | 19 | 20 | 21 | |
| 70-74 | 19 | 20 | 21 | 21 | |
| 75-79 | 20 | 21 | 21 | 21 | |
| 80-84 | 21 | 22 | 22 | 22 | |
| 85-89 | 22 | 23 | 23 | 23 | |
| 90-94 | 23 | 24 | 24 | 24 | |
| 95-99 | 24 | 25 | 25 | 25 | |
| 100-104 | 25 | 26 | 26 | 26 | |
| 105-109 | 26 | 27 | 27 | 27 | |
| 110-114 | 27 | 28 | 28 | 28 | |
| 115-119 | 28 | 29 | 29 | 29 | |
| 120-124 | 29 | 30 | 30 | 30 | |
| 125-129 | 30 | 31 | 31 | 31 | |
| 130-134 | 31 | 32 | 32 | 32 | |
| 135-139 | 32 | 33 | 33 | 33 | |
| 140-144 | 33 | 34 | 34 | 34 | |
| 145-149 | 34 | 35 | 35 | 35 | |
| 150-154 | 35 | 36 | 36 | 36 | |
| 155-159 | 36 | 37 | 37 | 37 | |
| 160-164 | 37 | 37 | 37 | 37 | |
| 165-169 | 37 | 37 | 37 | 37 | |
| 170+ | 37 | 37 | 37 | 37 |
The benefits of electric vehicles in your business
If you’re a business owner considering the use of electric vehicles (EVs) for your business and would like to learn some more, take a look at this video from our CEO, Mitch Hahn, on Nordens TV.
How we can help
Navigating company car tax can be complicated, but you don’t have to navigate it alone! At Nordens Chartered Accountants, we offer expert advice and assistance with company car tax. Our dedicated team of accountants and advisors is here to help you understand the tax rules and ensure you claim the maximum tax relief you’re entitled to. Whether you need guidance on tax implications or the benefits of electric vehicles, we have the knowledge and expertise to support you.
If you need assistance with company car tax or any other accounting services, look no further than Nordens Chartered Accountants. Contact us today at 0208 530 0720 or fill out our contact form to schedule a consultation.
