• The P11D value (list price including VAT, delivery charges and options)

• CO₂ emissions (in g/km) of the vehicle (WLTP or NEDC depending on registration)

• For plug-in hybrids and electric vehicles, the pure electric range may also influence the percentage.

• Whether the car is diesel and, if so, whether it meets Real Driving Emissions Step 2 (RDE2) standard (a diesel surcharge may apply).

It’s worth noting that the system has remained broadly similar for some years, though rates and thresholds are gradually increasing.

What’s changed for the 2025/26 tax year in respect of company car tax?

For the tax year beginning 6 April 2025 (i.e., 2025/26) there are a number of updates which affect company car tax:

• The BIK/appropriate percentage for cars with zero emissions (electric vehicles) rises from 2% to 3%.

• For vehicles with CO₂ emissions of 1–50 g/km (and plug-in hybrids), the appropriate percentage also rises by 1 percentage point from the 2024/25 level.

• For all other vehicles, the percentage rate rises by 1 percentage point in 2025/26 (until the cap of 37% is reached).

• The fixed figure for fuel benefit charge (when the employer pays for private fuel) increases to £28,200 for 2025/26.

• The diesel surcharge (4% for non-RDE2 compliant vehicles) remains relevant.

These changes mean that although low-emission and electric vehicles continue to benefit from favourable company car tax rates, the edge is gradually reducing — so planning ahead is even more important.

Company car tax rates table for 2025/26

Below is a summary table of the appropriate percentage rates for company car tax for the 2025/26 tax year.

These are based on emission levels and (for hybrids/EVs) electric-only range.

Petrol/Hybrid cars (including plug-ins)

*Source: HMRC “Appropriate percentage for company car benefits” table for tax year 2025/26.

Fuel benefit charge

If the employer pays for any private fuel for the company car, an additional taxable benefit arises.

For tax year 2025/26 the fixed figure is £28,200.

Things to watch when planning company car tax

Impact of diesel surcharge and older vehicles

If a diesel car does not meet the RDE2 emissions standard, a diesel surcharge of 4% applies to the benefit-in-kind rate.

For cars first registered before reliable CO₂ emissions data exists (e.g., before January 1998), alternative engine-size based rates apply.

Private mileage vs business mileage

If the employee pays for all private fuel, the fuel benefit charge does not apply — a potential tax saving.

If the car is unavailable (e.g., for 30 consecutive days), the benefit may be reduced pro-rata.

Salary sacrifice and electric vehicles

Many employers offer salary sacrifice schemes for EVs. Because company car tax for EVs is still at a low percentage (3% for 2025/26) that can be very tax-efficient.

However, the 1 percentage point rise for 2025/26 means the gap between EVs and conventional vehicles is gradually narrowing.

Cost-benefit comparison

Employees must compare the tax on the benefit with the cost of running their own car from taxed income.

If they drive very high business mileage, claiming mileage might still be more efficient than accepting a company car.

How Trueman Brown can help you manage company car tax

If you’re considering providing a company car to employees, or accepting one as an employee, the implications of company car tax can be complex — especially in light of the new 2025/26 rates.

At Trueman Brown we offer tailored advice, covering:

• Calculating the taxable benefit and likely tax cost of any particular car

• Viewing the trade-offs between company car, mileage reimbursement or salary sacrifice

• Advising on exemption opportunities (e.g., pool cars, lower-paid employees)

• Ensuring correct reporting and tax code adjustments

If you’d like to speak to us, please contact mark@truemanbrown.co.uk or call 01708 397262 for an initial discussion.

We’ll help you ensure you are getting the best value given the current and expected future levels of company car tax.

Frequently Asked Questions (FAQ)

Q: What is the minimum percentage for company car tax in 2025/26?
A: For the 2025/26 tax year, the lowest appropriate percentage for company car tax is 3% — this applies to pure electric cars (0 g/km CO₂) and plug-in hybrids with >130 miles electric-only range.

Q: When does the diesel surcharge apply?
A: The 4% surcharge applies if the vehicle is diesel-only (not a hybrid) and does not meet the RDE2 emissions standard.

Q: If my employer pays for all my private fuel, will I pay extra tax?
A: Yes — if your employer pays for any private fuel use in your company car, you’ll face a separate fuel benefit charge. For 2025/26 the fixed figure is £28,200 which is multiplied by the appropriate percentage to calculate the taxable benefit.

Q: Are the company car tax rates expected to rise further?
A: Yes — the government has confirmed that the percentages will rise gradually in subsequent years (2026/27 and 2027/28) and more sharply from 2028/29.

Q: Can private use of a “pool car” generate tax?
A: A car qualifies as a pool car if it is made available by the employer to multiple employees, is not allocated to one person for private use, and is not normally kept overnight at or near the employee’s home. In that case the private use benefit (company car tax) does not apply.

Q: What if I use my own car for business mileage instead?
A: If you use your own car and are reimbursed at or below HMRC’s statutory mileage rate, you avoid the company car tax issue. The rates are separate to company car tax.

We hope this guide gives you a clear update to the company car tax regime for 2025/26 and helps you with your planning.

For further personalised advice, remember to contact mark@truemanbrown.co.uk or call 01708 397262.