Strategies for businesses to plan ahead of company car tax changes

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Taxation for company vehicles is changing – again.

If you are managing a fleet, you will face higher costs, tougher decisions, and a balancing act between electric, hybrid, and traditional vehicles. So, how can you stay ahead?

Electric cars – Still cost-effective, but for how long?

Electric vehicles (EVs) remain the frontrunners for tax efficiency, but the landscape is changing.

Benefit-in-kind (BiK) rates for EVs will increase by one per cent annually, reaching nine per cent by 2029/30.

Add to that the end of the Vehicle Excise Duty (VED) exemption in April 2025, and EVs look slightly less lucrative than before.

That said, EVs still hold their ground when compared to petrol and diesel cars.

They are eligible for salary sacrifice schemes, and businesses can still claim first-year allowances for zero-emission vehicles and charging points until March 2026.

The takeaway? EVs remain the tax-efficient choice, but rising costs mean careful budgeting is required.

Hybrids – A temporary advantage with a ticking clock

Currently, hybrids with 1–50g/km emissions are taxed based on electric range, with the most efficient models at just five per cent BiK.

This window will close in 2028/29, when all hybrids will face a flat 18 per cent BiK rate (rising to 19 per cent by 2029/30).

For businesses considering hybrids, now’s the time to weigh short-term savings against long-term costs.

Are hybrids a practical bridge to full electrification, or will they soon lose their appeal entirely?

Traditional vehicles – Are petrol and diesel fleets sustainable?

While BiK rates for petrol and diesel cars will rise more slowly (capped at 39 per cent by 2029/30), businesses must question their value as long-term options.

The higher tax burden, combined with growing environmental pressures, makes these vehicles increasingly hard to justify.

For businesses reliant on traditional fleets, now may be the time to map out a gradual shift towards lower-emission alternatives.

Vans – A simpler, lower-cost alternative?

Vans remain a straightforward option, taxed at a flat rate of £3,960 annually, rising with inflation from April 2025.

This predictable structure makes vans an appealing choice for businesses managing tax costs.

However, 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. Transitional arrangements allow pickups purchased or leased before this date to retain van status until 2029, so businesses should act fast to secure savings.

What is the strategy?

The rising costs of Benefit-in-Kind taxation, the end of VED exemptions for EVs, and changes to hybrid tax rules mean businesses must rethink their fleet strategies.