Planning ahead for company car tax changes: What your business needs to know

If you manage a fleet, offer vehicles to staff, or are considering switching to electric, now’s the time to rethink your strategy. With rising Benefit-in-Kind (BiK) rates and shifting rules around hybrids and pickups, here’s how to stay ahead.

1. Electric Vehicles (EVs): Still tax-efficient, but budget carefully

EVs remain the most tax-efficient option, for now. BiK rates are low, starting at 2%, but they’ll rise by 1% each year until reaching 9% by 2029/30. The Vehicle Excise Duty (VED) exemption ended in April 2025, adding another cost to the mix.

That said, EVs still qualify for salary sacrifice schemes and first-year capital allowances until March 2026. If you’re planning to invest, act soon and budget for the long-term shift in tax treatment.

Also, don’t forget about the new levies coming in following the Autumn 2025 budget!!

2. Hybrids: A short-term win with a deadline

Hybrids with emissions between 1–50g/km are currently taxed based on electric range, with BiK rates as low as 5%. But this window closes in 2028/29, when all hybrids will face a flat 18% BiK rate (rising to 19% by 2029/30).

If you’re considering hybrids as a bridge to full electrification, now’s the time to act. Just be aware that their tax advantage is temporary - and shrinking.

Again, don’t forget about the new levies coming in following the Autumn 2025 budget!!

3. Petrol and diesel: Increasingly hard to justify

Traditional vehicles will see slower BiK increases, capped at 39% by 2029/30. But with environmental pressures and rising costs, they’re becoming harder to justify. If your business still relies on petrol or diesel fleets, it’s worth mapping out a gradual transition to lower-emission alternatives.

4. Vans and pickups: Simpler - but not for long

Vans are taxed at a flat rate (£3,960 annually), which makes them predictable and cost-effective. But new rules for double cab pickups could complicate things. From April 2025, pickups with a payload of one tonne or more will be taxed as cars - unless purchased or leased before the deadline.

Transitional arrangements allow businesses to retain van tax treatment until 2029, but only if action is taken before April 2025. If pickups are part of your fleet, now’s the time to review your plans.

5. Build a fleet strategy that works

With so many changes on the horizon, businesses need a clear, forward-looking strategy. Here’s a simple framework:

• Short-term: Take advantage of current low BiK rates for EVs and hybrids.

• Medium-term: Invest in EVs while allowances and exemptions still apply.

• Long-term: Phase out petrol and diesel, and prepare for higher BiK rates across the board.

  
  

At BlueFox Accounting, we help businesses plan ahead with clarity and confidence. Whether you’re reviewing your fleet, budgeting for tax changes, or exploring salary sacrifice schemes, we’ll guide you through the options and help you make informed decisions.