Company Vehicle Tax Changes - What You Need To Know

As a business owner, you may provide or be looking at providing your employees with company vehicles.

During the recent Autumn Budget, there were some key updates to the tax and benefit-in-kind rules for company cars and vans that could impact your decision regarding company vehicles for your team. Understanding these changes will help you plan effectively; in this article we are going to discuss some of the upcoming changes due to take place in this coming April.

Double-cab pickupsThe Government will treat double-cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars from the 5th of April 2025. For Corporation Tax this will be effective from 1st April 2025, and from the 6th of April 2025 for Income Tax. The government has specifically confirmed however, that DCPU’s that have been bought, leased or ordered before these dates will continue to be treated as commercial vehicles, up until the earlier of disposal date/lease end date or 5th April 2029.

Van benefit chargeThe flat rate for the van benefit will increase to £4,020 (from the previous £3,960) and the van fuel benefit will rise from £757 to £769 for the 2025-2026 tax year.

Hybrid carsPlug-in hybrid vehicles (PHEVs) in the UK will experience significant changes in their taxation for company car users. Benefit in kind tax rates will continue with small rises each year until 2028/29 when the benefit in kind tax rates will significantly increase for PHEVs, regardless of their ‘electric only’ range. For any vehicles on a 3-year contract, this will impact cars that are delivered from 6th April 2025 onwards, with the final part of the contract running past 6th April 2028.

Electric, zero or low emissionPreviously, electric vehicles were exempt from paying road tax. However, for electric, zero or low emission cars registered on or after 1 April 2025, you will need to pay the lowest first year rate of vehicle tax set at £10 from 1 April 2025. From the second tax payment onwards, you will pay the standard rate. This will be £195. For more information on this please see the government website here.

Road taxStandard Road tax rate is applicable starting from the second year of registration for all vehicles registered after 1 April 2017. From the 1st of April 2025, the standard rate will increase to £195 for all cars, including petrol, diesel, hybrid, and electric vehicles. This marks a change from the previous rate of £190 for petrol and diesel cars, with a £10 discount for hybrids, and no charge for electric cars. Additionally, the expensive car supplement will rise to £425 per year (which is an increase from £410). This supplement applies from the second to the sixth year of a car's life on the road if it was originally priced over £40,000.

As a business owner, it’s important to stay informed about the upcoming changes to company cars and vehicle taxation, especially if you provide company cars to your team. The changes set to take effect this April 2025 could significantly affect the costs associated with providing company vehicles to your employees, as well as the impact for the employees and the tax they incur. Understanding these changes now will give you the opportunity to plan and adjust your fleet management strategies. By staying ahead of these updates, you can make more informed decisions about the types of vehicles you offer and maximise tax efficiency for your business.

As always, especially in this complex area, we recommend that you speak to your accountant ahead of making any changes to company vehicles and any other taxable benefits. Selecting a company car without getting advice on the tax consequences could adversely affect you for years to come!

For more information on how we can help you and your business, please contact us via email or call and we will be happy to advise on the best solutions for your business.

Please note: This article is provided for information only and was correct as at the time of writing (13/03/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.